To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Title
Ordinance Approving the Second Amended and Restated Public Finance Agreement By and Among the Town of Castle Rock, Promenade Castle Rock, LLC, and The Promenade at Castle Rock Metropolitan Districts Nos. 1-3, Concerning the Development of Promenade at Castle Rock (Second Reading - Approved on First Reading on February 16, 2021 by a vote of 7-0)
Body
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Executive Summary
As Town Council considers the proposed rezoning of Planning Area Three (PA3) (also called Block 3A) of the Promenade at Castle Rock Planned Development Plan (PDP), Council will also consider a Block 3A Development Agreement (DA), and separately consider the Second Amended and Restated Public Finance Agreement (PFA).
As Council considers the DA and PFA, some background on the project and project financials may be helpful. Attached are two memos that provide background on the overall land use for the Promenade development and also provide background on the public finance agreement and the successful sales tax revenue from the project. As the information details, the Town has received over 20 million in net sales tax collections from the Promenade development that has allowed the Town to sustain and add services in our key functions of public safety and transportation. This new revenue to the Town has been crucial to our ability to provide Town services. As you review sales tax, it is important to note that we estimate that 60% of our sales tax revenue comes from customers residing outside Castle Rock.
Key components of the Block 3A Development Agreement
The Development Agreement (DA) for Block 3A provides certain key requirements for the proposed development. In addition to the typical requirements to ensure compliance with Town land use requirements, the DA has additional provisions. The DA requires the developer to deposit with the Town $200,000 upon execution of the agreement. These funds can only be used to reduce Town required fees for the commercial portion of Block 3A. If the developer fails to receive a building permit for the commercial portion of Block 3A within four years of the execution of the DA, those funds are forfeited to the Town. This provision is an incentive, at no cost to the Town, for the developer to construct the commercial portion of Block 3A. The developer is required to construct the outdoor commons park prior to the Town issuing a certificate of occupancy for any building, including the residential buildings, in Block 3A. Additionally, there is similar requirement for completion of the roadway and retaining wall landscaping. A key DA requirement is that the developer dedicate to the Town 43 acres of property on the east side of Interstate 25. This is a substantial addition of property to the Town’s open space, provides a buffer of property at the entrance into Castle Rock, and removes the potential for this property to be developed and thereby add traffic to the intersection of Founders and Allen Street. The Town and developer will split the cost 50/50 for the remediation of an existing building on this property that will be completely remediated and removed from the site.
Key components of the Restated and Revised Public Finance Agreement
The original Public Finance Agreement (PFA) was entered into in 2014, with an amendment in 2015. The PFA served as the major financial incentive to attract the Alberta Development Partners to undertake the Promenade development in Castle Rock. A key provision was the sharing of sales tax generated on the project (with certain exceptions such as the King Soopers development). This sales tax sharing is called a Credit PIF (public improvement fee). The current Credit PIF is 1.10%, meaning that the Town shares back to the development metro district 27.5% of the sales tax generated on the project. The developer and metro district are refinancing their debt as has been common with both homeowners and commercial entities during this period of low interest rates. As such, the restated PFA reduces the Credit PIF from 1.10% to 0.55%. Town staff estimates that this will mean that the Town, on average, will be able to retain an additional $1million per year in Town sales tax generated at the Promenade development. Another key provision of the existing PFA is the requirement for the Town to pay an amount to the development based on the gross leasable area (GLA) constructed. This incentive was meant to roughly equate to the Town fees that were required for construction on the property. This provision, along with another provision that required the Town to pay the portion of development fees totaling between $6 million to $8 million dollars, have been completed. This GLA and Town fee rebate provision have been removed from the PFA, thereby removing that potential financial liability upon the Town.
Proposed Motion
“I move to approve the Ordinance as introduced by title, on second reading.”
Attachments
Attachment A: Ordinance
Exhibit 1: Restated-Revised Public Finance Agreement (updated March 1, 2021)
Attachment B: Promenade Summary Memo - Development Services
Attachment C: Promenade Public Finance Agreement Update - Finance Department
Attachment D: Promenade sales tax by year less Credit PIF