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HomeMy WebLinkAboutPackets - Council Packets (1181) AGENDA ORO VALLEY TOWN COUNCIL STUDY SESSION JANUARY 26, 2004 ORO VALLEY TOWN COUNCIL CHAMBERS 11000 N. LA CANADA DRIVE STUDY SESSION - AT OR AFTER 4:30 P.M. CALL TO ORDER ROLL CALL 1. DISCUSSION REGARDING THE ECONOMIC DEVELOPMENT AGREEMENT FOR ORO VALLEY MARKETPLACE RETAIL CENTER (VESTAR DEVELOPMENT) LOCATED ON THE SOUTHWEST CORNER OF TANGERINE ROAD AND ORACLE ROAD ADJOURNMENT The Town of Oro Valley complies with the Americans with Disabilities Act (ADA). If any person with a disability needs any type of accommodation, please notify the Town Clerk's Office at 229-4700. Posted: 01/21/04 4:30 p.m. lh • TOWN OF ORO VALLEY STUDY SESSION COUNCIL COMMUNICATION MEETING DATE: January 26, 2004 Z TO: HONORABLE MAYOR& COUNCIL FROM: JEFFREY H. WEIR, CEcD ECONOMIC DEVELOPMENT ADMINISTRATOR SUBJECT: VESTAR ARIZONA XXXIX, L.L.C.'S REQUEST FOR AN ECONOMIC DEVELOPMENT AGREEMENT FOR THE DEVELOPMENT OF THE ORO VALLEY MARKETPLACE RETAIL CENTER • SUMMARY: ECONOMIC DEVELOPMENT INCENTIVE POLICY GUIDELINES. On October 3, 2001 the Mayor and Council approved Resolution NO. (R) 01 —90 Adopting Economic Development Incentive Policy Guidelines (copy of the resolution and guidelines are attached). The Guidelines provide the Town Council provisions to authorize the use of incentives for the retention and attraction of certain businesses that are considered beneficial in the diversification of the local economy. A priority of business types was identified and they are: 1. Resorts, 2. Retail, 3. Other Lodging, 4. High Tech Job Creation, and 5. Service Providers. One of the incentives considered available to the Town Council to be offered to the qualifying businesses include no more than 50% of the NEW retail sales taxes that the project could reasonably be expected to return within a ten year period. All Retail projects should generate significant sales tax revenues similar to a community or regional shopping center. The developers of Oro Valley Town Centre, Canada Del Oro Partners, have requested consideration of an Economic Development Agreement between the Town and the developer. BACKGROUND: THE PROJECT. Oro Valley Marketplace Retail Center as proposed is an 810,000+ square feet Regional Commercial Retail Center located on the western side of Oracle Road and south of Tangerine Road. The retail center as currently planned will be constructed in four phases. Potential tenants include Major and Minor Retail shops,Restaurants, Interior Design & Furniture Stores, and a multi-screen Theater. The Developer is committing to completion of and submission to the Town of a Development Plan for Phase 1 (approximately 300,000 sq.ft.) within twelve (12) months of the approval of the Economic Development Agreement (EDA). The Developer will be responsible for the construction of on-site and off-site improvements. Many new community infrastructure improvements will be included as part of this development. These include: 1. E e TOWN OF ORO VALLEY STUDY SESSION COUNCIL COMMUNICATION PAGE 2 OF 3 Signalization at Oracle Road and the Catalina State Park entrance, 2. Improvements to the eastside levee BigWash including major trail enhancements and 3. Other"public access" improvements on site. along J TheDeveloper has requested consideration by the Town Council for Revenue Sharing for a portion of the Town of Oro Valley's Sales Tax Revenues generated from each phase of the project for a period of fifteen (15) years. At this time it is anticipated that there will be four (4) phases to the project. The Developer has requested that an average of 50% of the Town's existing 2% Sales Tax be returned to the Developer. The q request asks for a return re q Developers of the new sales taxes generated by each of the four phases of the projecto of 70% during years 1 —5; 50% during years 6-10 and 30 /o during years 11 — 15. Attached fory our review are copies of Resolution NO. (R) 01-90 Economic Development Incentive Policy Guidelines, thero osed Economic Development Agreement and two spreadsheets, Oro Valley Town p P Centre Development Projections and Retail Sales Tax Revenue Sharing Calculations. The Developer has provided the Capital Investment and Development Estimates, Square Footage and Compositions of Buildings and Revenue Projections. ATTACHMENTS: 1. Copy of Resolution NO. (R) 01 —90,Adopting Economic Development Policy Guidelines. 2. Proposed Economic Development Agreement between the Town of Oro Valley and Vestar Arizona SIX, L.L.C. 3. Oro Valley Marketplace Preliminary Construction Cost Estimate. 4. Oro Valley Marketplace Revenues & Tax Sharing Summary Information Spreadsheet. 5. Oro Valley Marketplace Net New Town Revenues Chart. 6. Six full color sheets depicting: Aerial Site Plan, Elevation Views of the proposed development, Collage of Development Design Characteristics and Blown Up pictures of two of the Collage items. FISCAL IMPACT: • The Development Projections indicate total Retail Sales by Fiscal Year and applicable Town Sales Tax Revenues at the current rate of 2%. • The Summary Information sheet has incorporated the specific timing for each revenue sharing phase for the fifteen year period for each phase. • The Project is estimated to cost in excess of$ 100.0 Million. • The twenty one (21) year forecast window indicates that the Project will generate in excess of$ 5.2 Billion of Retail Sales that would be considered as part of the Revenue Sharing agreement. • The total estimated Retail Sales Tax Revenues for the same twenty one (21) year period is $ 103.2 Million. • TheP roposed Revenue Sharing for the fifteen (15) year segments associated with the agreement would provide the following: T f , w TOWN OF ORO VALLEY STUDY SESSION COUNCIL COMMUNICATION PAGE 3 OF 3 FISCAL IMPACT: CON'T. 0 Town of Oro Valley $ 65,699,605 64% Developer $ 37,515,043 36% Total $ 103,214,648 0 One-Time Revenues $ 1,155,411 RECOMMENDATION: NOT APPLICABLE. SUGGESTED MOTION: NOT APPLICABLE. ,...--f-'-r / or, - i /- „, / 1 t { 4,, 41 Jeffrey . Weir, CEcD Economic Development Administrator / i/ 44 it Ar - Chuck Swe•t Town Manager 41 • RESOLUTION NO. (R) 01 - 90 A RESOLUTION OF THE MAYOR AND TOWN COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA, ADOPTING ECONOMIC DEVELOPMENT INCENTIVE POLICY GUIDELINES. WHEREAS,REAS the Town of Oro Valley's General Plan has identified pursuing diversification of the local economy as highly desirable and is well supported by the community, and; WHEREAS the existing Community Economic Development Strategy states that one major action step desired is the development and adoption of a Business Incentive Policy, and; WHEREAS,the existing Community Economic Development Strategy further states that the Town may from time to time wish to use some form of incentives to attract or retain targeted businesses, and; WHEREAS,the Town of Oro Valley recognizes the importance of developing a policy and idelines that include similar considerations for the retention and expansion of existing targeted businesses as those that apply to the attraction of new targeted businesses; NOW THEREFORE BE IT RESOLVED BY THE MAYOR AND TOWN COUNCIL OF THE TOWN OF ORO VALLEY, ARIZONA: The adoption of Exhibit A, Town of Oro Valley Economic Development Incentive Policy Guidelines, attached herewith, provides examples of items that a business owner/developer may request consideration for. PASSED, ADOPTED AND APPROVED by the Mayor and Town Council of the Town of Oro Valley, Arizona, this 3rd day of oc t ob ,r 2001 . TOWN OF ORO VAL EY, ARIZONA Jac, Paul H. Loomis, Mayor ATTEST: Kat n Cuvel i er, Town Clerk 'PROVED : : EXHIBIT A TOWN OF ORO VALLEY ECONOMIC DEVELOPMENT ITNCENTIVE POLICY GUIDELINES provide To the Town Council a set of guidelines that assist in the retention of targeted businesses and the attraction of new or expanding targeted businesses to the Town of Oro Valley resulting in the diversification of the existing tax base and the creation of employment opportunities. POLICIES: In certain cases the Town may consider using some form of incentives in order to attract or retain targeted businesses. These incentives will only be used when the Town satisfies itself that the addition of the new business or retention and/or expansion of an existing business would have a significant, positive effect on the Oro Valley economy. The need for diversification of the local economy which minimizes dependence of residential sales tax revenues is a necessity. This policy places a priority emphasis on new and existing businesses thatgenerate si • ynificant sales tax revenues. As a guideline the following listing can be viewed as g a Pze rioritid preference: I. Resorts, 2. Retail, 3. Other Lodging, 4. High Tech Job Creation, and 5. Service Providers. The following general provisions shall be considered prior to offering incentives. 1. Incentives will only be offered if they are actually necessary in order to affect the retention and/or expansion of an existing business or to attract a new business to the Town. This would include: - A situation in which the Town of Oro Valley has determined that the retention of an existing business is desirable. - A situation in which the Town of Oro Valley is competing with other cities for the expansion of an existing business to the Town or where incentives are actually necessary to affect the expansion of an existing business. - A situation wherein incentives are needed to induce a business to relocate or expand their operation to the Town of Oro Valley from an existing site in another city. - A situation wherein incentives are needed to induce a business to locate their operation to the Town of Oro Valley. 2. A priority h should be placed on the businesses "targeted" in the Community Economic Development Strategic (CEDS) Plan (1997, or the most recent update). 3. Thero'ect will have a substantial positive economic impact on the community, i.e.; the p � - will offset number of jobs created or the sales tax created by the project in the long-term the short-term costs offered by incentives. Additionally, the project will be of such size or consequence to produce significant employment or sales in related sectors. 4. Incentives should not continue for more than a 10 year period. 5. An emphasis should be placed on firms that provide diversification (within targeted industrial or commercial sectors)to the Town's economy. 6. The Town will not buy land or existing buildings or construct buildings for purely private objectives. The Town's position should be to offer incentives that have a relationship to public benefit. Improvements such as streets, water lines,traffic signals, storm drainage, � parking structures, parks and open space, and similar publicly assessed improvements are examples of public-private financed incentives. Acquisition of propertyand construction of buildings, if necessary, must be related to a public purpose. 7. The dollar amount of the incentives offered shall not exceed the cost of the project considered nor shall the incentive value be more than 50%that the project could reasonably expect to return in benefits within a ten year period. 8. Private dollars should be utilized whenever possible to up-front identified project costs and then to be reimbursed by the Town to avoid straining the Town's operational or bonding capacity and reduce the Town's front-end risks. Pacy 9. Incentives can be utilized for resort, retail, commercial and industrial projects Town- wide. 10. In certain instances incentives may be offered in conjunction with annexation activities which are viewed as important strategically. In the case of large-scale development areas, incentives should be combined with a community facilities district, where feasible, to offer maximum flexibility in attracting development. II. The intangible or unmeasurable benefits of a business to a community, such as the location of a headquarters facility, enhancement of attractiveness to other similar businesses or suppliers, or other similar image-related items are also very important and should be considered along with other factors when making decisions on incentives. 12. Generally Retail projects which qualify should generate significant sales tax revenues similar to projects normally identified at a community or regional shopping center level. 13. Specific performance criteria for each project will be established. 14. New Retail development should have an emphasis on meeting a need not currently being filled in the community, or providing a higher level of service/goods /products than presently available, or providing similar services in an area not currently being served. 15. Final authority for any approval of the use of an incentive and/or inducement rests with the Town Council. 16. Each action is separate and independent from all other actions associated with the approval of the use of an incentive and/or inducement. DEVELOPMENT AGREEMENT This Development Agreement (the "Agreement") is entered into this day of 2003, by and between the Town of Oro Valley, an Arizona municipal corporation (the "Town") and Vestar Arizona XXXIX, L.L.C., an Arizona limited liability company(the "Owner/Developer"). RECITALS A. Owner/Developer was formed and exists for the purposes of owning and developing approximately 100 acres of real property located within the corporate limits of the Town, legally described and on Exhibit A attached hereto (the "Property"). B. Owner/Developer intends and desires to develop a regional lifestyle/entertainment/power retail shopping center of approximately 900,000 square feet within the jurisdictional limits of the Town consistent with state law, the Oro Valley Town Code, and applicable Town policies. 1. Proposed Uses: This retail center is planned to accommodate a range of differing but complimentary retail-related land uses on an integrated and master-planned basis. Typical uses envisioned in the center include destination and major anchor retailers not otherwise found or clustered in the Town, lifestyle and other retail shops, restaurants, entertainment facilities, national electronic and other hard goods retailing, financial institutions and other service businesses, landscaping, and distinctive common areas (the "Development"). Overall, the Development, which will have a unique regional draw, will create substantial additional sales tax revenues for the Town, will assist in the creation or retention of jobs and will otherwise improve or enhance the economic welfare of the residents of the Town by bringing customers to the Development from the Town and surrounding communities. Attached hereto as Exhibit B is a conceptual description of the master site plan for the Development. This master site plan will be updated in accordance with Section 3 below at the time of the submission of the Phase I plan as described in Section 3 below. a. For the purposes of this Agreement, the Development will be developed in phases (the "Phases," Phase," or Phase #"), each of which shall be considered an independent and separate project and shall be consistent with applicable development standards. Owner/Developer will designate the specific area to be included in each Phase prior to the approval by the Town of each Phase as developed. b. The Town and Owner/Developer desire to establish certain agreements regarding the Development pursuant to A.R.S. §9-500.05 and certain agreements in connection with economic development activities for the economic benefit of the Town pursuant to A.R.S. §9-500.11 upon and in accordance with the terms and conditions hereinafter set forth. U:Vvly Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 2. Community Economic Development Strategy: The Development comports with the Town's Community Economic Development Incentive Policy Guidelines and is expected to create a source of significant tax revenue for the Town for many years. a. The Town has determined that incentives are needed in order to develop the Property and to induce businesses to locate their operations in the Development. The incentives for each Phase shall not continue for more than fifteen (15) years as more fully set forth below. b. The Development will have a substantial positive economic impact on the Town because it is expected to provide diverse commercial and retail service opportunities consistent with the businesses targeted in the Town's Community Economic Development Strategy (September 1997). The Development is expected to produce a significant number of new jobs and generate substantial sales tax revenues as well as additional economic benefit by reason of the facilities to be constructed as part of the Development. Consequently, the long- term benefits of the Development will offset and significantly outweigh the costs of the incentives. c. The Development will offer significant intangible benefits to the Town as a retail lifestyle/entertainment/power center. It will provide retail, service, lifestyle, and entertainment uses consistent with the surrounding existing uses. C. The Development is in compliance with the Town's adopted and approved General Plan. On , 2003, the Town Council adopted Ordinance No. which approves and authorized the execution and delivery of this Agreement. D. A.R.S. §9-500.05 authorizes the Town to enter into a development agreement with a landowner or other person having an interest in real property located within the Town to facilitate development of the property by providing for, among other things, the conditions, terms, restrictions, and requirements for development and public infrastructure and the financing of public infrastructure. Because of its location and typography, the Development will entail significant atypical additional offsite and site costs requiring assistance for feasible development. E. In approving this Agreement, the Town Council has found and determined that certain activities relating to the Development are economic development activities within the meaning of A.R.S. §9-500.11, that all expenditures by the Town pursuant to the Agreement constitute the appropriation and expenditure of public monies for and in connection with economic development activities and that it is appropriate to provide Owner/Developer with the benefits in this Agreement as an inducement to cause Owner/Developer to construct, own, and operate the Development in the Town. F. The Town of Oro Valley has a population of less than 100,000 persons and the provision of A.R.S. §9-500.6 are inapplicable. 2 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 NOW THEREFORE, in consideration of the mutual promises made herein, the parties agree as follows: AGREEMENTS 1. Accuracy of the Recitals: The parties hereby acknowledge and confirm the accuracy of the Recitals, which are incorporated herein by this reference. 2. Effective Date: This Agreement shall be effective upon adoption and effective date of Town Ordinance No. and the execution of this Agreement by both parties and as provided by law. 3. Submission of Development Plan: As a condition precedent to the rights of Owner/Developer to share with the Town the site-specific sales tax revenues generated from the first and successive Phases of this Development in accordance with the provisions of Paragraph 8 of this Agreement ("Revenue Sharing") and the obligation of the Town to provide such Revenue Sharing, the Owner/Developer shall prepare and submit to the Town within twelve (12) months of the Effective Date of this Agreement a development plan (consistent with the Town's applicable existing standards) for Phase 1 of the Development (the "Phase 1 Plan") presently estimated to be approximately 300,000 square feet. The Town will, within the ensuing six (6) months, review and pursue final approvals of the Phase 1 Plan by the Town Council. Thereafter, the parties will diligently cooperate to process plans and specifications for necessary building permits for the approved Phase I plan. At the time that Owner/Developer submits the Phase I Plan, it shall also submit an updated revised conceptual master site plan for the entire Development. The parties agree that time is of the essence in the preparation, submittal, review and, if appropriate, approval of the Phase 1 Plan. 4. Designation of Phase Areas: Owner/Developer shall by right designate up to five (5) Phases, which Phases shall not total in excess of 900,000 square feet of rentable commercial space unless otherwise approved by the Town. Owner/Developer shall designate each Phase area when Owner/Developer submits a development plan for each Phase for the Town's review and approval. 5. Development: The Development shall be developed and constructed in accordance with the Town ordinances and development standards in effect at the time of the execution of this Agreement. In that regard, the Town shall not apply any hereinafter enacted development or impact fees to development on the Property and shall not apply to the Development any so-called Large Retail User or Big Box Ordinances (i.e., ordinances which imposes special limitations or restrictions on the development of single user retail facilities in excess of a certain size limitation [such as 100,000 square feet or more of retail space] for retail facilities on the Property). 6. Cooperation: To further the commitment of the parties to cooperate in the implementation of this Agreement, the Town and Owner/Developer each shall designate and appoint a 3 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 representative to act as liaison between the Town and its various departments and Owner/Developer. The representatives shall be available at all reasonable times to discuss and review the performance of the parties to this Agreement. The initiation representatives of the parties are: Town: Town Manager or his Designee Owner/Developer: David J. Larcher or his Designee 7. Fast Track: The Town shall, consistent with its adopted policies, provide to Owner/Developer of the Development priority in the processing, review and, if appropriate, approval of all plans, permits, and other applications and all shall be processed in an expeditious and priority fashion in order to ensure "fast track" treatment of the Development. If requested by Owner/Developer, the Town will dedicate an on-site inspector to expeditiously review and, if appropriate, approve or coordinate the review and approval of all construction and building approvals required in connection with the Development. If fast track treatment in the form of extra personnel is requested by Owner/Developer, all costs associates with such extra personnel, including without limitation, the dedication of an on-site inspector, shall be borne by Owner/Developer. Further, to facilitate the foregoing, the parties agree that if at any time the Owner/Developer believes an impasse has been reached with Town staff (the "Town Staff') on any issue affecting commercial development on the Property, the Owner/Developer shall have the right to immediately appeal to the Town Manager for an expedited decision on such matter. Such decision shall be made by the Town Manager (in such circumstances where a final decision can be reached by Town Staff) within seven (7) days after the Owner/Developer's request for an expedited decision. If the issue on which an impasse has been reached is one where a final decision requires action by the Town Council, the Town Manager shall schedule a Town Council hearing on the issue to take place within thirty (30) days after Owner/Developer's request for an expedited decision; provided, however, that if the issue must first be reviewed by the Town's Planning and Zoning Commission, the matter shall be submitted to the Commission within thirty (30) days and then to the Town Council at the first meeting following the Planning Commission hearing. 8. Revenue Sharing: A. Sales Tax Revenue Sharing: The Town agrees to share with Owner/Developer a portion of the sales tax revenue generated by each Phase of the Development as provided in Article 4 of the Oro Valley Tax Code, but not including any construction sales tax revenue. The present sales tax rate in effect is two percent (2%). The Town shall retain thirty percent (30%) of the Town's sales tax revenue generated by each Phase of the Development from the Town's sales tax during the five (5)-year period (the "Initial Sharing Period") commencing on the first day of the month following issuance of certificates of occupancy for a majority of the rentable space for the applicable approved Phase. Owner/Developer shall receive the remaining seventy percent (70%) of the Town's sales tax revenue generated by each Phase during the Initial Sharing Period for such Phase from the Town's sales tax. During the five (5)- 4 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 year period following the expiration of the Initial Sharing Period for the applicable Phase (the "Middle Sharing Period"), the Town shall retain fifty percent (50%) of the Town's sales tax revenue generated by such Phase of the Development from the Town's sales tax, and Owner/Developer shall receive the remaining fifty percent (50%) of the Town's sales tax revenue generated by such Phase of the Development from the Town's sales tax. During the five (5)-year period following expiration of the Middle Sharing Period (the "Final Sharing Period"), the Town shall retain seventy percent (70%) of the Town's sales tax revenue generated by such Phase of the Development from the Town's sales tax, and the Owner/Developer shall receive the remaining thirty percent (30%) of the Town's Sales Tax revenue generated by such Phase of the Development from the Town's Sales Tax. Accordingly, the blended percentages as between the Town and the Owner/Developer over the term of the sharing period equal 50% of the Town's sales tax revenues. In order to incentivize the prompt development of subsequent Phases, the fifteen (15)-year tax revenue sharing period shall commence no later than two (2) years following the issuance of certificates of occupancy for a majority of the rentable space from the prior approved Phase. If the sales tax rate decreases below the current 2% rate, Owner/Developer shall nonetheless receive payment hereunder as if the tax rate were at the 2% level. B. Revenue Sharing Procedures: Revenue Sharing as provided in this Paragraph 8 will be based on documentation that indicates proof of taxes remitted to the Arizona Department of Revenue ("ADOR") from or upon each Phase of the Development, as reasonably determined by the Town's Finance Director. The Town shall pay sums payable to Owner/Developer hereunder within sixty(60) days after the quarterly sales tax revenues generated from each Phase of the Development have been determined provided, however, that the Town shall have received payment from the ADOR. In the event the sales tax due from any Phase of the Development is adjusted due to error, overpayment, underpayment, or miscalculation, Town and Owner/Developer each agree to remit to the other any amounts necessary so that Owner/Developer and Town each receive their proportionate share of the sales tax revenue ultimately determined to be due for the applicable period. C. Maximum Cumulative Revenue Sharing: Under no circumstances shall Owner/Developer be entitled to share sales tax revenues, the total of which, for each Phase, exceeds the lower of the following amounts: i. The cost of that Phase; or ii. The percentages described in paragraph 8.A. D. Rebate — Not a Pledge: This Agreement creates rights and obligations regarding the payment of money, but nothing contained herein shall constitute a pledge of tax revenues. Nothing contained in this Agreement shall impair or restrict the right of the Town to pledge sales tax revenue from the Development. 5 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 9. Signage: The parties acknowledge that Owner/Developer will submit a sign package as part of the approval process for Development. The parties agree that signage on the Project, including tenant signage, will be of the general nature, quality, magnitude, and color palette of the Desert Ridge project located in Phoenix, Arizona. Developer will submit and the Town will approve signage consistent with the foregoing and Town agrees to modify its development standards as may be necessary to accommodate the foregoing and as may be necessary to conform with a particular retail user's distinctive building and site identify and attributes. 10. In the event that the Town adopts a property tax for real property within the jurisdictional limits of the Town, the Property constituting the Development will be exempt from such tax for the duration of the period of any sales tax revenue sharing pursuant to this Agreement. 11. General Provisions: A. Headings and Recitals: The descriptive headings of the sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. The Recitals set forth at the beginning of this Agreement are hereby acknowledged and incorporated herein and the parties hereby confirm the accuracy thereof. B. Exhibits: Any exhibit attached to this Agreement shall be deemed to have been incorporated in this Agreement by this reference with the same force and effect as if it were fully set forth in the body of the Agreement. C. Entire Agreement: This Agreement and the attached exhibits constitute the entire agreement between the parties pertaining to the subject matter of the Agreement. All prior and contemporaneous agreements, representations, and understandings of the parties, oral or written, are superseded and merged in this Agreement. D. Further Acts: Each of the parties to this Agreement shall promptly and expeditiously execute and deliver all of such documents and perform all of such acts as reasonably necessary, from time to time, to carry out the matters contemplated by this Agreement. E. Recordation: The parties agree to cause an original counterpart of this Agreement to be recorded in the Real Estate Records of the Office of the Recorder of Pima County, Arizona, within ten (10) days of the full and complete execution and delivery of this Agreement by all parties. F. Amendments: No change or addition is to be made to this Agreement except by a written amendment executed by the Town and Owner/Developer. Within ten (10 days after any amendment to this Agreement, such amendment shall be recorded in the Official Records of Pima County, Arizona. 6 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 G. Governing Law; Cancellation Pursuant to A.R.S. §38-511: This Agreement is entered into in Arizona and shall be construed and interpreted under the laws of Arizona. In particular, this Agreement is subject to the provision of A.R.S. §38-511. Under A.R.S. §38-511, as amended, the Town may cancel any contract it is a party to within three (3) years after its execution without penalty or further obligation if any person significantly involved initiating, negotiating, securing, drafting, or creating the contract on behalf of the Town is, at any time while the contract or any extension thereof is in effect, an employee or agent of any other party to the contract in any capacity or a consultant to any other party to the contract with respect to the subject nature of the contract. In the event the Town elects to exercise its rights under A.R.S. §38-511, as amended, the Town agrees to immediately give notice thereof to Ovvn er/Developer. H. Notices: All notices given pursuant to this Agreement shall be given in person or by first class, pre-paid certified mail (return receipt requested) to the following persons or any other persons a party may designate in writing: To the Town: To the Owner/Developer: Town of Oro Valley Vestar Arizona XXXIX, L.L.C. 11000 N. La Canada Drive 2425 E. Camelback Rd, Suite 750 Oro Valley, AZ 85737 Phoenix, AZ 85016 Attn: Town Manager Attn: David J. Larcher cc: Town of Oro Valley cc: Vestar Arizona XXXIX, L.L.C. 11000 N. La Canada Dr. 2425 E. Camelback Rd, Suite 750 Oro Valley, AZ 85701 Phoenix, AZ 85016 Attn: Mark Langlitz, Esq. Attn: Allan J. Kasen, Esq. Town Attorney 1. Litigation: Nothing herein shall preclude non-binding arbitration if the parties so elect in the event of a dispute hereunder. J. Successors and Assigns: This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties to this Agreement pursuant to A.R.S. §9-500.05(D). Owner/Developer shall retain the right to receive its share of the Town's sales tax revenue generated by each Phase of the Development from the Town's 2% sales tax as provide by Paragraph 8 of this Agreement regardless of the status of title or ownership of any or all of the Property unless Owner/Developer expressly assigns such rights as provided herein. No assignment, however, shall relieve either party of its obligations hereunder, except that an assignment by Owner/Developer in connection with the transfer of title to the Property shall relieve Owner/Developer of its obligations hereunder provided such transferee agrees to be fully bound by the provisions hereof. Any assignment by Owner/Developer shall be subject to the approval of the Town, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Owner/Developer may assign this Agreement to any Affiliate of Owner/Developer or any entity in which 7 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 1 t 4 • Owner/Developer or an Affiliate of Owner/Developer is a managing member or managing partner. As used herein, the term "Affiliate" means any entity under common control with Owner/Developer. Further, notwithstanding the fact that this Agreement is being recorded in the Official Records of Pima County, it is intended that this Agreement shall not be an encumbrance upon the title of any person purchasing or owning a portion of the Property, and that the terms and conditions of the Agreement are not covenants running with the land and that no person is bound by (or entitled to) the burdens and benefits of this Agreement unless such burdens are expressly assumed or such benefits are expressly assigned by such person. K. Force Majeure: Notwithstanding any other term, condition, or provision hereof to the contrary, in the event any party hereto is precluded from satisfying or fulfilling any duty or obligation imposed upon such party by the terms hereof due to labor strikes, material shortages, war, civil disturbances, weather conditions, natural disasters, acts of God, or other events beyond the control of such party, the time period provided herein for the performance by such party of such duty or obligation shall be extended for a period equal to the delay occasioned by such events. L. Severability: If any provision of this Agreement is held to be illegal, invalid, or unenforceable, in whole or in part, under present or future laws, such provisions shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by the severance of such provision from this Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as part of this Agreement, a provision as similar in terms to such illegal, invalid, or unenforceable provisions as may be possible and still be legal, valid, and enforceable and this Agreement shall be deemed reformed accordingly. Without limiting the generality of the foregoing, if all or any portion of the payments required by the terms of this Agreement are determined, by a court of competent jurisdiction in a final non- appealable judgment, to be contrary to public policy or otherwise precluded, the parties shall utilize their reasonable, best efforts to promptly restructure and/or amend this Agreement, or to enter into a new agreement to afford the Owner/Developer the economic benefits of this Agreement in light of the benefits to the Town. M. Time is of the Essence: Time is of the essence in the performance of each and every obligation by the Town and Owner/Developer as provided for herein. N. Lender Provisions: The Town is aware that financing for development, construction, and operation of the Development may be provided, in whole or in part, from time to time, by one or more third parties (collectively, "Lender"), which Lender may request a collateral assignment of this Agreement as part of its collateral for its loan to Owner/Developer. The Town agrees that such collateral assignments are permissible without consent of the Town. In the event of default by Owner/Developer, the Town shall provide notice of such default at the same time notice is provided to 8 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 Owner/Developer to any Lender previously identified in writing to the Town. If a Lender is permitted, under the terms of its agreement with Owner/Developer to cure the default andlor to assume Owner/Developer's position with respect to this Agreement, the Town agrees to recognize the rights of Lender and to otherwise permit Lender to assume such rights and obligations of Owner/Developer under this Agreement. Nothing contained in this Agreement shall be deemed to prohibit, restrict, or limit in any way the right of a Lender to take title to all or any portion of the Property, pursuant to a foreclosure proceeding, trustee's sale, or deed in lieu of foreclosure. The Town shall, at any time upon request by Owner/Developer or Lender, provide to any Lender an estoppel certificate, acknowledgement of collateral assignment, or other document evidencing that this Agreement is in full force and effect, that it has not been amended or modified (or, if appropriate, specifying such amendment or modification), and that no default by Owner/Developer exists hereunder (or, if appropriate, specifying the nature and duration of any existing default) and certifying to such other matters reasonably requested by Owner/Developer or Lender. Upon request by a Lender, the Town will enter into a separate assumption or similar agreement with such Lender consistent with the provisions of this Paragraph. O. Town Representations: The Town represents and warrants to Owner/Developer that: i. Town has the full right, power, and authorization to enter into and perform this Agreement and each of Town's obligation and undertakings under this Agreement, and Town's execution, delivery, and performance of this Agreement have been duly authorized and agreed to in compliance with the requirements of the Oro Valley Town Charter and the Town of Oro Valley Code. ii. All consents and approvals necessary to the execution, delivery, and performance of this Agreement have been obtained, and no further action needs to be taken in connection with such execution and delivery. iii. The Town will execute all documents and take all actions necessary to implement, evidence, and enforce this Agreement. iv. This Agreement (and each undertaking of the Town contained herein), constitutes a valid, binding, and enforceable obligation of Town, enforceable according to its terms, except to the extent limited by bankruptcy, insolvency, and other laws of general equity. v. The Town shall defend any action brought to contest the validity of this Agreement (except for items for which Owner/Developer is responsible under Section 10.P.iv below) and shall not seek from Owner/Developer any contributions, payments, costs, or attorneys' fees incurred in such defense. 9 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 } t Y , 1 ' vi. The execution, delivery, and performance of this Agreement by Town is not prohibited by, and does not conflict with, any other agreements, laws, instruments, or judgments to which Town is a party or is otherwise subject. vii. The Town has been assisted by counsel of its own choosing and has been fully apprised of all risks associated with the transaction contemplated in this Agreement. P. Owner/Developer Representations: The Owner/Developer represents and warrants to Town that: i. Owner/Developer has the full right, power, and authorization to enter into and perform this Agreement, and the Owner/Developer's execution, delivery, and performance of this Agreement have been duly authorized and agreed to in accordance with the organizational documents of the Owner/Developer. ii. All consents and approvals necessary to the execution and delivery of this Agreement have been obtained, and no further action needs to be taken in connection with such execution and delivery. iii. The Owner/Developer will execute all documents and take all actions necessary to implement, evidence, and enforce this Agreement. iv. Owner/Developer shall defend any action brought to contest the validity of this Agreement arising from Owner/Developer's violation of the foregoing representations and shall not seek from the Town any contribution, payments, costs, or attorneys' fees incurred in such defense. v. The execution, delivery, and performance of this Agreement by Owner/Developer does not conflict with, any other agreements, instruments, judgments, or decrees to which Owner/Developer is a party or is otherwise subject. vi. Owner/Developer has not paid or given, and will not pay or give, any third party any money or other consideration for obtaining this Agreement other than normal costs of conducting business and costs of professional services such as the services of architects, engineers, and attorneys. vii. The Owner/Developer has been assisted by counsel of its own choosing and has been fully apprised of all risks associated with the transaction contemplated by this Agreement. Q. Compliance Confirmation. When requested by either Town or Owner/Developer, which request can be made from time to time, the other shall confirm the following in writing to the requesting party as soon as practicable of the request, but in no event later than fifteen (15) days from the date of the request: 10 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 i. This Agreement is unmodified and in full force and effect (or reasons why it is not). ii. Based upon knowledge, there are not any uncured Defaults under this Agreement (or reasons why there are). iii. Such other matters as the requesting party shall reasonably request. R. Consents: Except where any matter is expressly stated to be in the sole discretion of the party, in performance of this Agreement or in considering any requested extension of time, the parties agree that each will act in good faith and will not act unreasonably, arbitrarily, capriciously, or unreasonably withhold any approval or consent required by this Agreement. S. Counterparts: This Agreement may be executed in counterpart originals. IN WITNESS WHEREOF, the parties hereto have caused to be executed, the day and year herein written. (Signatures on next page) 11 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 TOWN TOWN OF ORO VALLEY, an Arizona municipal corporation By: Name: Paul H. Loomis Title: Mayor ATTEST: By: Kathryn E. Cuvelier, Town Clerk Dated: APPROVED AS TO FORM: By: Mark Langlitz, Town Attorney Date: OWNER/DEVELOPER VESTAR ARIZONA XXXIX, L.L.C., an Arizona limited liability company By: Name: Title: 12 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 STATE OF ARIZONA ) ) ss. County of Pima ) The foregoing instrument was acknowledged before me this day of 2003,by , as of the Town of Oro Valley. Notary Public My Commission Expires: STATE OF ARIZONA ) ) ss. County of Maricopa ) The foregoing instrument was acknowledged before me this day of 2003, by , as Manager of Vestar Arizona XXXIX, L.L.C., an Arizona limited liability company. Notary Public My Commission Expires: 13 U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft January 16,2004 EXHIBIT A LEGAL DESCRIPTION OF THE PROPERTY U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft EXHIBIT B CONCEPTUAL MASTER SITE PLAN APPROVALS U:\My Documents\Economic Development Agreements\Oro Valley Marketplace\VESTAR DEVELOPMENT AGREEMENT Latest Draft Oro Valley Marketplace Attachment 3Page 1 of 2 Retail Development Economic Development Agreement Development Details Land Land/Building Cost Per Construction Acreage Square Feet Sq.Ft. Value Phase 1 47.36 2,063,002 $ 1.13 $ 2,340,000 Buildings/Pad's: Major G/H 205,000 $ 45.00 $ 9,225,000 I 33,000 $ 55.00 $ 1,815,000 Major55.00 1,375,000 Major 3 25,000 $ � Major A 10,000 $ 65.00 $ 650,000 Pad K 6,000 $ 50.00 a. $ 300,000 Pad L 5,000 $ 50.00 a. $ 250,000 Pad N 5,000 $ 50.00 a. $ 250,000 Pad 0 5,000 $ 50.00 a. $ 250,000 Pad P 5,000 $ 50.00 a. $ 250,000 299,000 $ 14,365,000 Off-Site Improvemenis 2,063,002 $ 0.83 $ 1,713,816 2,063,002 $ 5.30 $ 10,932,354 On-Site Improvements $ 75,000 Misc. Site work $ 12,721,170 Other Costs/Allowances $ 7,824,193 Phase i Total Costs $ 37,250,363 Phase 2 13.8 601,128 $ 1.13 $ 680,000 Buildings/Pad's: Major ? 86,500 $ 50.00 $ 4,325,000 Shops ? 10,000 $ 65.00 $ 650,000 Pad ? 6,000 $ 50.00 a. $ 300,000 Pad ? 5,000 $ 50.00 a. $ 250,000 Pad ? 8,000 $ 50.00 a. $ 400,000 115,500 $ 5,925,000 Off-Site Improvements 601,128 $ 0.75 $ 450,846 601,128 $ 4.50 $ 2,705,076 On Site Improvements $ 75,000 Misc. Site work $ 3,230,922 Other Costs/Allowances $ 4,010,292 Phase 2 Total Costs $ 13,846,214 EDA SUMMARY DATA Preliminary Construction Cost 1/20/2004 Oro Valley Marketplace Attachment 3 Retail Development Page 2 of 2 Economic Development Agreement Development Details Land Land/Building Cost Per Acreage Square Feet Sq.Ft. Value Phase 3 21 914,760 $ 2.22 $ 2,035,000 Buildings/Pad's: Theatre ? 60,000 $100.00 $ 6,000,000 Shops ? 12,000 $ 65.00 $ 780,000 Shops ? 10,000 $ 65.00 $ 650,000 Shops ? 65,000 $ 75.00 $ 4,875,000 Pad ? 6,000 $ 50.00 a. $ 300,000 Pad ? 5,000 $ 50.00 a. $ 250,000 Pad ? 8,000 $ 50.00 a. $ 400,000 Pad ? 8,001 $ 50.00 a. $ 400,050 Pad ? 8,002 $ 50.00 a. $ 400,100 182,003 $ 14,055,150 Off-Site Improvements 914,760 $ 0.75 $ 686,070 On-Site Improvements 914,760 $ 3.50 $ 3,201,660 Misc. Site work $ 75,000 $ 3,962,730 Other Costs/Allowances $ 7,788,837 Phase 3 Total Costs $ 27,841,717 Phase 4 17.38 757,073 $ 1.48 $ 1,120,000 Buildings/Pad's: Major ? 24,000 $ 50.00 $ 1,200,000 Major ? 25,000 $ 50.00 $ 1,250,000 Major ? 18,000 $ 50.00 $ 900,000 Major ? 25,000 $ 50.00 $ 1,250,000 Major ? 8,000 $ 50.00 $ 400,000 Shops ? 19,000 $ 65.00 $ 1,235,000 Shops ? 30,000 $ 65.00 $ 1,950,000 Pad ? 6,000 $ 50.00 a. $ 300,000 Pad ? 5,000 $ 50.00 a. $ 250,000 160,000 $ 8,735,000 Off-Site Improvements 757,073 $ 0.75 $ 567,805 On-Site Improvements 757,073 $ 3.50 $ 2,649,756 Misc. Site work $ 75,000 $ 3,292,560 Other Costs/Allowances $ 5,832,027 Phase 4 Total Costs $ 18,979,587 Total Investment $ 97,917,881 EDA SUMMARY DATA Preliminary Construction Cost 1/20/2004 0 M Lo O O N O N .-i O M t0 00 tD et O 01 C1 O O M M (7% 0 00 in CO *♦ M 4. CO Mt0t0t0 N 01 N .-1 .4M rltONet rlt0M 0 et COO =w CO e!' 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