7.B

CITY OF BUCKEYE
City Council Regular Meeting
Council ACTION REPORT

ACTION / MOTION: (This language identifies the formal motion to be made by the Council)

Council to take action on Resolution No. 18-18 approving the Economic Development and Retail Tax Incentive Agreement by and between the City of Buckeye and Nikola Corporation, a Delaware corporation, relating to development of land in the City of Buckeye as an electric vehicle manufacturing/assembly facility; Authorizing the Mayor to execute and deliver said Agreement on behalf of the City.

RELEVANT GOALS:
GOAL 4: Adequate, Well-Maintained and Well-Planned Public Infrastructure

PROJECT DESCRIPTION: 

Council will be asked to approve the formal economic and retail development tax incentive agreement entitled “Economic Development Agreement by and between the City of Buckeye, Arizona, an Arizona municipal corporation, and Nikola Corporation, a Delaware corporation (the “Agreement”)”.  The Agreement relates to the development of a new electric truck manufacturing/assembly facility to be located approximately at the northwest corner of Sun Valley Parkway and the Cactus Road alignment.  At its March 6, 2018 meeting, the Council unanimously adopted a Notice of Intent relating to this agreement, per State law, and now is being asked to make formal approval of the Agreement.

For about a year, City staff has been working with Nikola Corporation (“Nikola”) as they went through an extensive national site selection process to determine the best location for the development of a 1.0 million square foot facility to serve as their corporate headquarters and manufacturing location. This process resulted in their selection of a site within the Trillium master planned community in Buckeye.

BENEFITS:

This facility will have many benefits to the City, including (i) the creation of over 2,000 high paying jobs, (ii) the investment of over $1.0 billion in the community, (iii) the likely inducement of many ancillary businesses, such as suppliers, service providers, and support operations, (iv) the addition of a major corporate headquarters facility to the City, (v) the creation of significant new tax revenues for the City, (vi) the provision of significant new public infrastructure improvements, and (vii) the inducement of new residential, service, and retail opportunities in Buckeye. 

FUTURE ACTION: Council and staff; does this need to be communicated internally/externally?

As part of ongoing conversations with Nikola, a number of items have been discussed and represent important aspects to Nikola in determining if they will relocate their business to the City of Buckeye. A summary of financial incentives offered is as follows:

• Nikola will construct the new facility and will be required to pay construction sales tax to the City in connection with the construction of the new facility.  Estimated revenue to the City as a result of the construction sales tax will be approximately $10 million.  The City will reimburse Nikola 49% of construction sales tax revenue generated by the construction of their new facility.  The remaining 51% of the construction sales tax revenue will be retained by the City.
• Nikola will pay to the City all required building permit, plan check, and expedited review fees related to the development of the facility at the time they are due.  The City will then reimburse Nikola the amount paid to the City up to a maximum of $750,000.
• The City agrees to support Nikola’s request for designation as a Foreign Trade Zone under FTZ #277.
• Nikola has not decided if it will make any sales of its products in Buckeye, but should it decide to do so the City will reimburse Nikola 49% of the City portion of the sales tax revenue generated from these sales, for a maximum 10 year period.  The remaining 51% of the sales tax revenue will be retained by the City.
• Should Nikola provide any additional public benefits (such as land for a public park or vehicles), the City is also willing to reimburse Nikola for those benefits using a formula indexed to 49% of the City portion of the property tax paid on the facility, for a maximum of 10 years or the amount of the benefit, whichever is less.  This will be pursuant to a separate written document agreed to by Nikola and the City.

• The City agrees to provide, if so requested by Nikola, the temporary use (until the new facility is completed) of approximately 5,000 square feet of space the City owns at Sundance Center at Yuma and Dean Rds. at no cost to Nikola.

FINANCIAL IMPACT STATEMENT: Must be completed before submission

Attached are the Rounds Consulting findings that the tax incentive set forth in the Agreement is anticipated to raise more revenue than the amount of the incentive during the term of the Agreement.  This finding has been independently verified, as required by law, in a report by Rounds Consulting Group, dated August 21, 2017.  The report is attached as an exhibit to this Council report.