Litchfield Park explores financing for $26M City Center infrastructure project

By Kelly O’Sullivan
Twitter: @AzNewsmedia

As its long-awaited City Center project moves forward, Litchfield Park officials are looking at financing options for $26 million in infrastructure that must be completed before construction can begin.

A second $26 million would be needed to build parking decks once the full project is 40% complete.

During a work study session before its regular virtual meeting May 19, the City Council heard a presentation on funding options from City Manager Matthew Williams, Finance Director Paige Peterson, Engineer Woody Scoutten, and representatives from Stifel, Nicolaus and Co. Inc. of Phoenix, the city’s bond agent.

Ultimately, the public-private mixed-use City Center development is expected to feature 400,000 square feet of high-end retail, restaurant, office and residential space around a 2.5-acre downtown park where residents can gather and the city can hold events and festivals.

City Center will be built on 12 of 30 acres the city purchased downtown several years ago for a little more than $5 million. Other amenities on the 30-acre site include Scout Park and the historic Scout Lodge.

READ: State of the City: Litchfield Park eyes City Center groundbreaking

The plan calls for the city to begin infrastructure improvements this summer, then sell six parcels to private developers in 2022 and 2023 to generate $7.2 million in revenue, with the first buildings going up in June 2022.

Mr. Williams broke down the infrastructure needs into four parts:

• Demolition, clearing and rough grading, $1.2 million;

• Utilities and storm drains, $6.2 million;

• Streets, landscaping and phase one of the City Center park, $8 million; and

• Remaining streets and park work, $10.6 million.

Part of the $8 million in streets and landscaping expenditures will include building a roundabout on Litchfield Road at Village Parkway at a cost of about $1 million, Mr. Williams said.

After the group presented several funding scenarios, Mr. Williams recommended the council:

• Establish a Community Facilities District covering the property to pay back $21 million in bonds over 30 years. CFDs are special districts communities can use to finance public infrastructure, with boundaries set for the specific land to benefit from the infrastructure financed;

• Commit the city to pay $4 million to cover utilities work and City Center park development;

• Have the properties assessed by a commercial broker and prepare the parcels to receive bids from developers.

The council expects to vote on the recommendations at a future meeting.

The first bond payment of $740,400 would be due in July 2022.

In the best-case scenario outlined by Ms. Peterson, the city would see land sales revenue of $2.88 million in fiscal 2022 and $4.32 million in fiscal 2023, which would cover debt payment until fiscal 2029.

City Center would begin generating sales tax revenues in fiscal 2024, with a projected amount of $225,000, and increase yearly until they reached $2 million annually in fiscal 2029.

The city would cover a portion of debt payments from its general fund through 2026, then the CFD would make the full payments using its sales tax revenues.

Two additional scenarios factored in slower land sales and sales tax revenues, which would require the city to cover debt payments through 2028 or beyond fiscal 2030, something both Mr. Williams and Ms. Peterson said are feasible.

Parking decks

In addition to funding the initial infrastructure, the city will need to secure another $26 million to build three parking decks to augment the 750 ground-level \spaces that will be part of initial construction, but that will come later.

“We don’t want to start out building parking garages right off the bat. We want to see and make sure we’re going to be heading toward that 400,000 square feet and phase them in over time,” Mr. Scoutten said.

The parking decks would add 1,300 spaces required to serve the site, with construction to begin once the project is at 40% build out.

Full build out is targeted for 2028.

Funding options include more bonds, or a special sales tax rate for City Center businesses.

At build out, City Center is expected to generate $2 million in annual sales tax revenue at city’s current rate of 2.8%, but increasing City Center’s sales tax rate to 5% would generate an additional $1.562 million annually at build out, Mr. Scoutten said, noting it would be a pass-through to customers.

“You would be paying a little bit more for your steak dinner or your dress, but it is probably not going to make a lot of difference to people who are shopping in the City Center,” he said.

Kelly O’Sullivan can be reached at kosullivan@newszap.com or 760-963-1697.