Title
Resolution - Consideration and Approval of a Resolution Approving a Tax Increment Reinvestment Zone Reimbursement & Chapter 380 Economic Development Agreement between the City of Mansfield, Texas, the Board of Directors of Reinvestment Zone Number One, City of Mansfield, and Chisolm Flats, LLC; Authorizing the City Manager to Execute Said Agreement; And Providing an Effective Date
Requested Action
That the City Council approve the agreement and authorize the City Manager to execute the agreement.
Recommendation
It is city staff’s recommendation that the City Council approve the agreement.
Description/History
In late 2021, the landowners on the northeast corner of Lone Star Rd and HWY 287, known as Chisholm Flats (David Berzina and Bob Jonas), brought plans to city staff of small pad sites along Lone Star, directly across from Texas Health Hospital. Considering their zoning, and the fact that SUPs are required for drive-thrus, staff was able to request we sit down and discuss this site with a much grander vision in mind. Staff mentioned that we had all of the economic development tools available to make this a win-win and truly special place for the community.
Those conversations transformed their concept plans into a true mixed-use development with substantial restaurant and civic plaza space that would likely be a destination for entertainment. Those plans are what guided the SOMA zoning category, in which this project was the first case to be considered and approved for SOMA. As part of their next steps, a land assemblage plan, development agreement, and phasing plan were required. While the development agreement is strictly related to zoning and not economic development, there was also the need to assist with incentives to bridge the gap in market risk within the project.
If you will recall back in October 2022, when this agreement came to you previously, the incentives being requested were slightly higher and the agreement would have required the City to take on some of the upfront risk. That was the case because of the timing being considered for infrastructure reimbursements. After going back to the drawing board, we have arrived at a mutually agreeable deal that staff believes protects the City, bridges the gap for the developer, and incentivizes remarkable development.
There are three tranches of funding for consideration in this agreement:
1. Off-site, or regional, infrastructure
a. Developer to design and construct all infrastructure for the 54 acre development. City will reimburse up to $3,500,000 as off-site infrastructure is completed and accepted, based on actual costs. This is for infrastructure that provides benefit to properties beyond the 54 acres. City will utilize various sources of funds for reimbursement.
2. On-site infrastructure
a. Upon completion of the various on-site infrastructure segments, AND Upon certificate of occupancy for an office tenant or Destination Restaurant/Retailer, City to provide a grant to reimburse on-site infrastructure in an amount equal to the lesser of 70% of actual costs or $9,500,000;
b. This will be paid to developer annually, as Property TIRZ Funds are available, then, once the Property TIRZ Fund is generating a minimum of 1.25 debt coverage for bond payments, the City will bond the remaining amount for the developer reimbursement. This is the same process that was used in the South Pointe Development Agreement.
3. Incentive Payments
a. Once all conditions are met, a portion of the available Property TIRZ Fund will be reimbursed to developer, according to the Property TIRZ Fund Priorities (flow of funds, or waterfall) described in the next paragraph, through calendar year 2052 and capped at $10,000,000.
Property TIRZ Fund Priorities:
1. Property TIRZ Fund Priorities without Bond Issuance. The available funds in the Property TIRZ Fund shall be applied and paid out in the following order of priority:
a. first, to the City for the payment of costs associated with the City Impact Fees and Park Development Fees, not to exceed thirty percent (30%) of funds within the Property TIRZ Fund, on an annual basis;
b. second, for the Developer’s Reimbursement on an annual basis; and
c. third, Incentive Payments to the Developer.
2. Property TIRZ Fund Priorities with Bond Issuance. In the event the City issues bonds for the payment of Developer’s Reimbursement, the available funds in the Property TIRZ Fund shall be applied and paid out in the following order of priority:
a. first, to the City for the payment of costs associated with the Bond Issuance;
b. second, to the City for the payment of costs associated with the City Impact Fees and Park Development Fees, not to exceed (30%) of remaining funds within the Property TIRZ Fund, on an annual basis; and
c. third, Incentive Payments to the Developer.
Justification
This agreement is necessary to accelerate commercial construction by assisting with the advanced placement of infrastructure rather than waiting until the market can support parcel by parcel development over a much longer period of time. The incentives aim to elevate the types of commercial users, as provided in the zoning ordinance and agreement. The project is expected to reach $450,000,000 in taxable value upon full build-out over the next fifteen years. Within the projected duration of the TIRZ #1, the project is expected to yield $26,000,000 in the TIRZ revenue and another $20,000,000 over this same period to the city's general fund. Staff believes this is an agreement that will provide the highest return at the lowest risk to the City.
Funding Source
TIRZ #1
Prepared By
Jason Moore, Executive Director of Economic Development
817-728-3651