VP 66 & Woody Mountain LLC, which is managed by Vintage Partners, LLC, is the developer of the Timber Sky project generally located at 3425 West Route 66. In late 2016, the City and VP 66 & Woody Mountain, LLC entered into a development agreement pertaining to the Timber Sky project.
The original development agreement included City obligations to reimburse the developer for upsizing and extending water and sewer infrastructure adjacent to and extending beyond the boundaries of the Subject Property. Owner obligations included the provision of on-site and off-site water and sewer improvements per the approved Water Sewer Impact Analysis, the provision of a sewer line easement through the property at the time of Phase 1 Final Block Plat, traffic mitigation, increased outdoor lighting mitigation, the provision of 100 for-sale affordable housing units, stormwater mitigation as well as maintenance of on-site improvements.
First Amendment: In the original development agreement the Owner agreed to replace the existing 8" sewer line with an 18" diameter pipe the reach of 3,100 feet along Thomson Street and West Kaibab. The first amendment had the Owner agreeing to replace this section of sewer with a combination of an 18", 21", and 24" diameter pipe as well as the extension of the 24" line in the Clay Avenue Wash. These improvements were a planned City project and as a result, the City agreed to reimburse the Owner for the cost of the project. The original development agreement also required all off-site sewer improvements completed prior to the issuance of the first building permit. The City agreed that there is capacity in the current sewer system for 125 single-family dwelling units and the City agreed to issue permits for those units in advance of the completion of the above referenced sewer improvement. Additional units may be permitted depending upon the completion of the sewer improvement plans.
Second Amendment: In August 2017, representatives from Vintage approached the City Manager with the concern that the increase in Engineering Fees would derail the Timber Sky project. Vintage estimated that the new Engineering Fees would add $1.6 million in costs to the project, which the developer could not sustain. Over the next few months, Staff worked with Vintage on a proposed Second Amendment to the Timber Sky Development Agreement that would waive or forgive the estimated $1.6 million in increased Engineering Fees. After a series of back-and-forth negotiations with Vintage, a proposed Second Amendment was finalized for Council consideration. An overview of the Second Amendment is provided below.
- Locked-in Fees: Engineering Fees and cost recovery schedule that were in place when Development Agreement was adopted by City Council will apply to the project for the term of the Development Agreement as an incentive for Vintage delivering one hundred (100) permanently affordable housing units within the development.
- 75% Target for Affordable Units: Amendment establishes 75% target for sale of affordable housing units prior to plat recordation within Phase 4. If 75% of the affordable units have not been sold and transferred to the City’s Community Land Trust (CLT) prior to developer requesting plat approval for Phase 4, the City will withhold plat recordation within Phase 4 until the target is met, or until Vintage pays $16K for each undelivered affordable unit.
- Flexibility to go to 125% AMI: If the affordable units are not selling at 100% of Area Median Income (AMI), the amendment allows for the Affordability Plan to be amended to adjust the AMI for qualified buyers to 125% of the AMI affordability level.
- Affordable Unit Delivery Requirements Unchanged: The Development Agreement still requires delivery of 100 permanently affordable housing units.
Third Amendment: The original Development Agreement pertaining to the Timber Sky project required the developer to construct certain off-site sewer improvements. These off-site sewer infrastructure improvements were part of a larger Westside Sewer Improvement Phase I and Phase II, contained in the City's five-year CIP plan. The First Amendment to the Development Agreement dated September 18, 2017, designated Vintage Partners, LLC to construct both phases of the downstream sewer improvements and outlined a schedule for the City to provide reimbursement. Since that time Vintage Partners' construction schedule had been delayed and the City elected to proceed with construction of Phase I of the Westside Sewer Improvements along Clay Avenue Wash ahead of Vintage's schedule, as reflected in the Third Amendment to the DA. Vintage constructed Phase II, completing the Westside Sewer Interceptor project.
Overview of Proposed Third Amendment to the Timber Sky Development Agreement:
- The City will complete Phase I construction of the Westside Sewer Interceptor.
- Vintage agrees to publicly procure and construct Phase II of the Westside Sewer Interceptor.
- The City agrees to reimburse Vintage for all costs associated with the construction of Westside Sewer Interceptor, Phase II (Thompson-Kaibab portion), including permit fees and reasonable project management expenses to be approved by the City.
Fourth Amendment: The fourth amendment to the development agreement was in response to the developer requesting to substitute affordable rental units for the commitment of 100 permanently-affordable single-family ownership units. As agreed upon, the Fourth Amendment exchanged 40 ownership units with Habitat for Humanity and 190 rental units serving 60% area median income or less for the 100 ownership units. The amendment also allowed for the transferring of density within the project, removed the $16,000 per unit monetary penalty for failure to deliver 75 of the 100 affordable units prior to the Phase 4, and provided that the developer would pay current engineering fees for Phase 4.
- Section 5.1.3 Densities: This new addition allows the density of the project to be transferred between development parcels regardless of zoning category. This provision will not increase the overall maximum density for the project, nor will it permit the density of any individual development parcel to exceed the maximum density for that parcel.
- Section 5.2 Workforce Housing: This section of the original Development Agreement–requiring 100 residential ownership units–was replaced with the following provisions:
Affordable Rental Units: First, Block One will be deed-restricted, requiring the development of at least 190 affordable residential units that will be rented to lessees with an average household income of 60% or less of the Area Median Income (AMI) for a period of no less than 30 years. Vintage is under contract with Roers for the development of these units. The Vintage obligation is met once a rough grading certificate is received for the property and the deed restriction is recorded.
Affordable Ownership Units: Vintage will donate no less than three acres to Habitat for Humanity to develop no less than 40 homes for permanent affordability through the City Community Land Trust program. The specific land and proposed layout will be attached to the proposed Development Agreement Amendment. The units will be part of the Timber Sky Homeowners Association and therefore subject to the same design standards in order to maintain consistency in the community. The property will revert to the City of Flagstaff if development is not complete within five years of Agreement. The City and Habitat shall enter into an agreement regarding the specifics of the housing development.
- Sections 8.4.1.1 and 8.4.1.2 Water Fees: These sections will be deleted because advance payment of water fees are no longer necessary.
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