Just in time.

Good morning.

Welcome to the Mesa City Council study session for June 4th.

I am your host, Vice Mayor Scott Summers.

Mayor Freeman is online.

Mayor Freeman, can you hear us?

Loud and clear, sir.

Actually, and uh Councilmember Heredia.

Yes, thank you.

All right.

And most of the rest of council's here.

Councilmember Adams is supposed to be here.

I think he's just running a few minutes late.

So we'll note when he uh walks in.

Item number one is to review the agenda for the June 8th, 2026 City Council meeting.

And I'll note that our study session today, items 5A and 5E, I believe, will be part of the study session.

So we can skip over that for now because we'll we'll we'll handle that.

So other than two pages of liquor license.

Seriously.

Yeah.

Um anybody have anything they want to uh discuss?

Vice Mayor, I know Councilmember GoForth had asked about item uh for C on um for solid waste, and Sherry Collins is prepared to come up and uh talk a little bit about the new uh camera systems that they'd like to procure for our drivers.

So, Sherry?

Good morning.

Let me see if I can do this.

Did I see four slides?

Yeah.

Oh you are employee of the month.

I'll take it.

Good morning, Vice Mayor, Council members, and the um mayor on the phone and council member heretti on the phone on the uh online.

My name is Sherry Collins.

I'm the Solid Waste Director, and I'm here just to give you a brief overview of the um what we're proposing um to purchase.

What we're proposing to purchase is to upgrade our current external facing cameras on our solid waste vehicles.

Um the cameras that we currently have on our trucks are between six and ten years old.

Um there's been a few conversations recently about how technology gets old after you know about five years, and so the the cameras that we currently have on our trucks are some of them are reaching the 10-year mark.

Um so with these new cameras, um, we do get some advanced features.

So, what we get for these external facing cameras are advanced safety features for pedestrian collision warnings and blind spot detection.

Um, this is gonna give us comprehensive vehicle coverage.

We have between five and seven cameras on our vehicles, depending on the truck type.

We have multiple truck types, so it just depends on the truck type how truck type, how many cameras we put on them.

Um it's actually gonna give us high definition video, which provides really clear footage of incident investigations.

It's night and day from what we have now.

At the very end, I have a slide that shows a difference in quality.

And this is gonna provide our drivers with real-time in-the-cab safety assistance.

So, just to go a little bit further in what our current system provides versus what our proposed system will provide.

Our current system requires physical access to the vehicles for video retrieval, so the truck actually has to be stopped in the yard.

You know, these trucks work uh uh six days a week, 10 hour shifts at least.

And so to get them in the yard, there's a really small window, really early in the morning, late at night, or on Sundays.

And so we have to physically have those trucks in the in the yard to retrieve the hard drives.

Uh, this new system provides a really nice cloud-based system where we can access everything from our desktop.

Um, the hard drive removal uh again takes time.

We'll have stacks of them where we have to download the video and then get them back in the truck.

Um, IT actually had to create a specialized laptop just so that we could actually go and um troubleshoot these old systems.

And so that again the technology is is becoming outdated.

But these new ones are pretty nice.

We have remote video retrieval and system management, so we won't need that specialized laptop any longer.

Um and then again, as I mentioned before, we have aging hardware, so though those cameras are you know six to ten years old.

The new ones have modern platform and then continuous software enhancements because they are cloud-based and we can do everything from the from the um desktop.

Um, the ones we have right now, we have frequent hard drive failures and potential data loss, but with the new ones, we have the cloud storage with simple video preservation.

Um we do have limited troubleshooting capabilities with the ones that we currently have.

Um with the new ones, we'll have remote diagnostic um calibration on support, so that'll be nice.

Um and one of the other really nice features is the AI feature in the new systems, the current ones we don't have any AI safety features, but the new ones will have um AI safety features and coaching tools.

So just to give you um on this last slide here, just an idea of what the quality difference is.

I just took a couple frames from each system.

Um, and on the left-hand side, you'll see just how cloudy it is and how um hard it is to really see what's going on.

We do our best with it, and they are extremely beneficial.

Um but the new ones just have really nice high definition clear images that'll make it a lot easier for us to do incident investigations.

Sherry, why don't you also explain to council?

You you told me a good example of some of the safety features and and the immediate feedback it gives to our drivers and how how you've seen a major creating ahead of us.

We're like, what's an AI safety feature?

Well, it's only four slides.

We'll let it go through it.

So what's an AI safety feature?

Okay, so the cameras that we have, um, the ones on the external, we have internal and external cameras on our trucks.

So the external cameras, the AI safety features is pedestrian warnings.

Um it will show the drivers have uh screens in their trucks, and it'll show all the the angles of the cameras.

And so it'll give them pedestrian warnings to where if the pedestrian or there's an obstruction on the side coming up, um, it will show them on the screen, it will show them the pedestrian.

So if somebody's on a scooter, which is a pretty big danger for us, it will actually start flashing and it'll go yellow, red, and it'll start beeping really loud.

And so that they're aware that that scooter is on the side.

And it's pretty neat.

These are not um it's literally night and day between the image of what we have, between the quality of what we have now.

And our trucks, you know, we don't replace our trucks every year.

We keep our trucks up to 10, some are even 13 years old, and they're very expensive.

Well, our personal vehicles have all these safety features, and so with the system that we're implementing, it makes it really nice because it's not proprietary to the type of truck.

So they're plug and play with each type of truck we get.

So it's not like we have to go out and replace the truck to get the new feature.

It's just these cameras that we have to replace because they have all the features in them.

The in-cab cameras that we currently have.

Um, there are two cameras in the cab right now with this new technology.

So we're really upgrading the external ones to meet the internal um safety features that we already have.

Um, those are really nice.

The AI safety features they have are for driving events, so it'll be harsh breaking, harsh turning.

Um, it'll be not wearing your seat belt, so it'll tell it'll tell the driver wear your seatbelt.

Um, it'll also tell a driver that um following um increased following distance, so it measures that as well.

And the other day we actually got our first alert with somebody following too close behind.

And you know how that is in our regular vehicles when someone's following too close behind and you can't see them, and it's a it's a danger.

So we actually got our first one the other day because we have rear-facing cameras as well, and it actually told us, you know, hey, someone's following too close behind you.

Like I don't know exactly what it said, but it did alert us in the cab.

So those are some of the AI features that we have in there, and then just adding this pedestrian one just elevates out a little bit more.

And then the the other part of it, I think you wanted me to tell them was um when we installed these cameras, um, you know, we want to get buy-in, so we install the cameras.

So then when we install the cameras, we had um uh a lot of safety alerts.

Um I I don't want to alarm you, but um, you know, it's it's a new technology, right?

So now we're starting to know, and we had um we turn them on, we we put the cameras in, and then we turned on the audible alarms.

And so when we turned on the audible alarms um in those in-cab cameras that we have, um, when we turn those on the amount of alerts that we got reduced by 50%.

So they're starting to listen.

So as they're alerting them about these driving habits, they're self-correcting.

And so we did see a reduction in alerts by over 50%, which was pretty nice.

So so just like your car, it the truck annoys you enough that you're really paying attention, you know, to those little small things and and self-correcting.

So it is having an impact on um driver safety, which is which is a positive.

Is that why you don't like driving your wife's tests?

Yeah, I know, right?

It's excellent.

Vice Mayor.

Yes, Mayor.

That's exactly the question I was going to ask.

Will it reduce safety or increase safety awareness for the drivers and then also preventable accidents?

And Sherry, have you done an analysis on how many accidents you have today, and then be able to quantify that in the future when these uh systems implemented?

Thanks.

Yeah, no problem.

Um, Mayor, um, if I don't answer both your questions, let me know.

But yes, it it is actually we are seeing it is uh reducing the amount of incidents just by that, you know, the data that we saw that that just the alerts have been reduced by 50 percent.

Um and then what was your second question?

Have we done data analysis?

I'm sorry.

Um we just the data analysis, uh, we're working on that doing the data analysis um in the solid waste industry.

We we have multiple um factors with um, you know, onboarding new employees and training, and then also these AI cameras.

Um, but we are actually working with the Office of Innovation and Efficiency as well on this technology that we're getting so that we can start producing some of those reports.

Great.

Like to see the outcome of that in the future.

Thank you.

Thank you.

My question kind of goes along with that.

What happened?

So this is great.

We get all the data, we get all these alerts.

Then what do we do?

Is there you know training?

Is there what happens?

What's kind of the next outcome of all of it?

Yeah, absolutely.

So we do have a safety uh uh coordinator and a safety technician on solid waste.

And so we do take this data to use for training, absolutely.

So especially if we see um, you know, a high number of alerts on a specific thing, whether it's harsh driving or not wearing your seatbelt, we definitely will train to that.

Um and then um even the harsh breaking events.

So we can do one-on-one training, we can do group training if we see stuff.

Um, but again, just those audible alerts has really helped us a lot to reduce that.

I I think one of the good things, um, Vice Mayor and Council is that as Sherry said, if they can identify that right now, um, you know, they're they're working, not they're not foregoing any of the things they need to do on training, but um they have to get drivers out into the field, and so um they they put people through an aggressive training program and then and then they're out driving.

And so, but if they can pick up trends about where maybe the training was lacking because they're seeing commonality in some of the data or some of the errors that are being made from some of the drivers from that, then they'll be able to reshift their their training program or focus more, do more continuing education, um, whatever it may be uh with the drivers based on the on commonality of data that they're seeing.

That's great.

Are they able to turn the alerts off?

Like, you know, I you know when it gets annoying, you just we actually have the administrators, and so we basically have administrative rights to what we turn on and turn off.

Okay, great.

Thanks for the answer to uh the subscription uh is is quite costly.

What are we gaining through that subscription?

I understand cloud storage, but I have a home security system, and I you know it's I I get that this is different, it's an enormous amount of video storage, but that just I'm thinking about how that is quantitatively very, very high, and what's the quality that we're gonna receive as a result of it.

Um well, currently, uh Vice Mayor uh council member Taylor, currently what we have is uh the an a system called Brigade.

And for that system, for you know, the the video that we have and basically the units that that we have on lease, um we pay 120,000 a year.

So just to to clarify, the the increase in this is just a little less than $30,000 a year.

Um, and then the magnitude of the vehicles that we have, we do have 123 vehicles with this.

So we get use of the system, constant upgrades, and then of course, all those AI features are great.

Um, and then it's like I said, the cloud storage and being able to do everything online and do everything from the desktop.

So our current camera system is about 120,000 a year and it's antiquated and you have to have this hard drive extraction, and you have to download it on a special that's the quantitatively quality.

And honestly, six to ten years ago, we were so excited to get that system.

Yeah, and we saw you know so much with that system.

But then as we started adding in this this new technology, um, again, I the easiest way to say it's just night and day.

Right.

Do we know how many incidents we have with our fire or um sorry, not our fire trucks, our garbage trucks a year?

Do we even I mean I never hear about them, which is great, but I'm assuming we don't have a lot.

Um I have that data, I just don't know it off the top of my head, but we do collect that data, yes.

Okay, I'm I've got no other questions.

It was more or less really just the subscription service, understanding, you know, that they're gonna basically manage all of that for us.

You just have administrative rights to to toggle whatever we need to.

Yes.

And what is the the cost for?

So thanks.

You're welcome.

Thank you.

And I think one thing to keep in mind about that, you know, the cost and such, the safety has to be upmost because it only takes one accident where we get sued.

There's I think a current one still in litigation.

Um it would pay for a lot of subscription, just just one accident and one interface in which the city gets sued.

I was thinking about lawsuits.

Yeah.

Like the millions of dollars versus the hundred.

Yeah, and the uh mayor and uh vice mayor and council and the complexity of the conditions that they're driving in is you know, obviously not just the curb side, you know, pickup that you're thinking of, it's the shopping centers, it's the um multifamily complexes, and you think of all the people, pedestrians, interactions, bikers that are all happening as as these folks are just trying to do their job and and pick up um the bins, and and yet, you know, the these are additional tools that help them have additional eyes and ears as they're out into the field.

Yes.

Fantastic.

And thank you for saying scooters and not e-bikes.

I really thank you.

Mayor Freeman, do you have any uh items on the agenda that you would like to have questions for staff it's always hard to find the uh mute button?

Or Frankie?

He just said no.

He texted it.

Uh I have to 4D.

Thanks.

Councilmember Heredia, and go ahead.

Uh 4D purchase of solar powered portable traffic signal trailers for the transportation department.

I was just curious to know.

I know this is a temporary time frame, but what what is the temporary time frame?

Like how long do we plan on using something like this?

Is this something we can lease?

Are we just buying it outright?

I was just curious to do that.

So uh good morning, Vice Mayor, Councilmember Taylor.

Um so these specific the these specific uh temporary signal trailers are gonna go out at the intersection of Higley and Longbow right now.

Um they've started refilling the quarry that's out there, and they're they're running I think right now 500 trucks a day, but they said uh up to eight eight to nine hundred trucks a day.

Um we were made aware of this situation around Christmas time, and we've been working with the the quarry owner owners, they're actually uh gonna pay for part of part of these trailers.

Um so we we needed to get them out right away right now to design and construct a traffic signal we're looking at 12 to 18 months.

So we're gonna initiate uh a project for that location here next fiscal year.

Um so these will probably be out 12 to 18 months.

We are purchasing them because we're finding the need with with the growth in construction that's happening that there are certain locations that we need temporary trailers or temporary signals.

So we'll be reusing them uh after this at different locations.

I'm just curious to know did you do a cost analysis to see if it's cheaper for us to buy it and move them around than to lease account?

I don't even know if you can lease one of these things.

Councilmember Taylor, that's a great question.

Uh yes, by the time we get the use out of them, we will have make our money back quite a bit.

I you know, just we have two temporary trailers that are out at um Valvista and what will be the Lehigh Shared Use Path right now.

We're we're constructing a tunnel underneath.

We originally were gonna have those trailers up for six months.

Uh we're going on 15 months now.

So if we had had to lease those two uh quite a bit more expensive.

Great.

Thank you.

I don't have any other questions.

I appreciate it.

So we do this isn't new.

This is something we do.

How many trailers do we have?

Uh council member go forth.

This actually is uh new for us.

The the two trailers that we have on out on Valvista were our first that that we have that are a system.

We have emergency trailers.

We uh I we have uh quite a few emergency trailers that if you know a poll gets knocked down, we can go out and put up in an emergency, but they don't necessarily reach out across the the street far enough uh to get signal heads up over the lanes that that these system does.

So the ones that but the ones at Valve, these are similar to the ones at Valvista.

They are they're actually they're a little bit bigger.

Um these are a little more expensive because we wanted to get the longer arms so that we could use them on arterial roads like Higley that you know have multiple lanes.

Okay.

But we're we're I mean, this is not something where it will uh you just are gonna do for any project or any task of you know, correct.

This this is for um you know situations that we know we're gonna put in a signal someday.

Um and we but we need something out there before we can get that signal constructed.

Yeah, we and Eric correct me if I'm wrong on this, but um, I mean we appreciate it's the Johnson Stewart um company that once they've have finished the fill that's been going on at the 202 and alma school, uh they've now uh shifted to this location, and so the number of trucks have increased dramatically, as Eric um has said, and and basically overnight too.

And so it's it's not a situation where um you know we could have waited a year and a half in order to install this, knowing the safety concerns of those large trucks and eight to nine hundred.

Is that what you said, you know, a day or yeah, so so a lot of fill going in.

So we we appreciate them working with us and partnering with us.

I said they're gonna participate financially in that um by the burden that that has placed on the system.

So we we appreciate that partnership with them.

Very good.

Anything else?

Thank you.

Thank you.

Any other items on the agenda other than uh 5A or 5e?

Because we'll address those here in a minute.

I'm gonna go right in between them and address 5B.

Five Bravo.

It's five bravo.

Um I saw you're back there.

I think I know who's gonna come answer this question.

All right, can you help me understand?

I know in January, the January the vote was cast to approve the maintenance for the light rail.

I think it was like around 15.6 million dollars-ish.

Can you help me understand the difference between that and this increased amount of 18.28?

So I read the report, but I just thought it latency terms are a little easier for everyone listening to.

We took it later than we normally do because we we have a we've bring light rail, the light rail and the RPT agreements all at the same time to be very transparent about what the costs are and to eliminate any confusion.

Um the agreement we took in January had it, I think it was a net cost of so that's after we and this is where it gets confusing.

The the bus side, our estimates are in net cost, the rail side our estimates are in gross costs.

Um so our gross cost for fiscal year 16, I think is about 18 million dollars.

So after we deduct our fares and different revenue sources, it comes into just a little over 15, almost 16 million dollars.

Um the rail this year I think the the gross cost the gross cost is 21 million, and so after you deduct the fares, it's around 18 million.

Um part of the reason for some of the increases is Valley Metro on both the on both their budgets, because it's two separate agencies, um, was very aggressive in addressing budget reductions.

The um they reduced 11, 11 and a half million dollars um off of their just base administrative by eliminating positions, reducing advertising costs, reducing IT, um all of those factors.

They limited their budget to just what what they call continuing commitments.

So in the Rails case, it's the continuing commitment to um for the contractor to operate the service.

There's a cost associated with that that increases each year as part of their contract, um, and then inflationary um or ridership driven things like um fuel for some of the equipment and different things like that.

Um the other added element to this, which increased some of the rail cost is we're in a transition period between proposition 400 and proposition 479, which um that is the transportation sales, regional transportation sales tax, and Prop 479 was um approved by the voters in November of 2024.

And while the freeway and streets program pretty much remained the same, the transit program um has some pretty um pretty significant changes to the structures of those programs.

So there were things that Prop 400 used to fund on behalf of the rail system that Prop 479 does not fund.

Um and two examples of those are what Valley Metro calls future project development, um, which added about a million dollars to our budget, and that's and if I can just back up a minute.

The overall rail budget is divided amongst the three rail cities based on the percentage of rail that's operated in the city.

So in Mesa, that's about 16, a little over 16 percent.

Um so future project development includes things when Valley Metro goes to seek grants.

Um, much like our engineering engineering department charges administrative time to a project, they need to be able to charge their administrative time somewhere.

So that funds that element.

It funds um if we have a developer come in um to develop a one of the parking rides, they have to have staff time to work with the cities to be able to redevelop that.

And an example of that happened in Tempe at Cal-de-Sac when that was going in.

Valley Metro was very involved with that because they had to add an extra.

That particular station front of Cal de Sac only had one entrance point.

So they had to design and construct an entrance point for that.

So that that is what that features in.

The other part is called system-wide improvements.

Um so that would be things like Valley Metro last year did a sept head review of all of its facilities.

Um patrol septhead.

SEPTED?

Yeah.

Well, say what that is.

What does that mean?

Oh, now I'm gonna get environmental design.

So in Mesa, one of the SEPTED findings was at our light rail stations, for example, at Alma School, they have um a three-foot wall on the ramp going up to the station.

That um was recommended, those kind of walls were recommended to be demoed and replaced with a wrought iron gate so you can see all the way through.

So those are the kinds of things that would fall under or projects to do with travel time improvement.

Those would things that would fall under system-wide improvements.

Now, when um when we put it when we put in the budget, it was a higher number.

So during the course of the budget season, um we were able to reduce that number.

I think it was an additional, it was higher, it was a higher number, so we're down to we've cut that number almost in half from what it was kind of originally the additional cost was.

Looks like Channel 11 pulled up the uh slides if you want to.

Yeah, I have um oh great.

Um just to kind of go through um I've kind of already talked about the timing.

Um the RPTA agreement, just backing up on the bus side, it's a 41.1 million dollars worth of service, and it funds 20 bus routes and our paratransit and ride choice programs, which are um for our ADA certified residents throughout the city.

Um most of the funding, 38.8 million of the RPT agreement comes from proposition 400 and 479.

Um 5.5 million would become from the city's local funds, and that funds um four bus routes, and those are four bus routes that are not eligible, currently eligible for funding under Prop 400, because we're again we're in this transition period from 400 to 479.

Um so overall, this is a 2.4 million dollar increase over.

Um, and if I can just go back to something that was commented on Monday night about the bus network redesign program.

Um we are in this transition period, and one of the things Prop 479 puts um an emphasis for additional funding and an episode funding on productivity and putting product productive routes on the streets, and a big part of starting with that is Valley Metro is doing a bus network redesign program project to look at where are those most productive routes and where are the best areas to invest these regional dollars.

Um that that study's taking a little bit longer, um, but we're working through that, and hopefully this fall we'll be ready to go out to the community with recommendations for what came out of that study.

But specific to this one, the back to the light rail.

The January vote was for 2026.

Right.

This net impact to our general fund of 18.28 million dollars is for 2027?

2027, yes.

Um just just thank you, Vice Mayor.

Just for clarification, the fun the the slide we're looking at right now is 5C, correct?

Uh 5B.

No, 5C, I'm sorry.

So but I thought the question was on five.

Right.

We had already had we'd I put together this presentation and put it in order.

Usually it's the bus first over the years.

It's just got just a tracking.

I'm I'm not trying to confuse anybody.

Okay, no, I I I enter the room that way, so don't worry about it.

Okay, so I just want to make sure I'm looking at the right thing.

So that previous slide was five C right.

So this this next slide is for 5B, which is um what's in the budget is 21.1 million dollars because we pay the gross cost, and then we get reimbursed revenues from fares, advertising, preventative maintenance, um, Arizona lottery funds that that comes to us that we offset.

Um and it kind of goes through the net cost.

In the end, the net cost should be 18.3 million.

Um it includes a million dollars for future project development and 300,000 for system-wide improvements, which are not covered under Prop 479, and um this represents a 3.2 million dollar increase over fiscal year 26.

And Vice Mayor and Council, I think one of the things, and and I can't remember if we just discussed this in January, and like you said, that the normally we don't have them six months apart.

It was because they had uh major negotiation with um operator group, right?

It was because so every seven years on the bus side of things, we renegotiate a master funding agreement, and we were negotiating there were contract language that we were kind of at odds with, and so we we reached an agreement on that.

By the time we reached an agreement and getting it into the council cycle for agendas with Christmas and Thanksgiving, we just we ended up in January.

It was an oddity, it's not it's not how we normally like.

And when you say we, are you talking about the municipalities?

You and okay, so this didn't necessarily impact any of the other municipalities agreements with that.

No, okay, they all have their own agreement.

So normally it wouldn't have been voted on in January, is what I'm hearing.

Correct.

Yes, it would have been done in J in July, just like I I know you all enjoy talking about light rails so often, but we usually only try to bring the funding agreements once every every 12 months.

It was just because we we knew that the um agreement on the on the drivers, basically the the that's such a big cost on the bus side, obviously, is how much that the labor side of it is for the people driving the buses, and that's what was under negotiation.

We thought it was it it didn't make sense to bring an agreement earlier to council that we knew was going to change and that we were going to have to come back and amend once those negotiations were finished between Valley Metro and and the um and the group and and the operator.

Um and so that's why we held off on bringing the agreement until mid-year.

But now that a seven-year agreements back in place, we'll be able to get back on our normal 12-month cycle of bringing and bringing these agreements forward.

And our line is five miles, right?

It's about five and a half miles.

So that's three point six, five, six million for every mile that we're spending after everything's deducted, the fares and everything like that.

Yeah, okay.

So uh I'm sorry, go ahead.

Um I recall a rather robust conversation uh in January about this issue.

Am I recalling correctly, Mr.

Smith, you gave us a breakdown that this is more or less an evergreen contract that we entered 20 some years ago.

And I think the the result of that robust discussion was that if we didn't move forward and approve these things, we would be in default.

Am I recalling that correctly?

Is it's basically a contract we're in.

Yes, more time immemorial.

Um mayor and council, so there's there's several agreements, and um the the short answer to your question is yes, what you stated is is correct.

The concept you stated is correct.

Um just so that the public and reminder to council, there's several agreements.

One is the joint powers agreement.

That was um sort of the foundational document, and and and it's an intergovernmental agreement, and it it it's the agreement that the the cities agree to create a separate legal entity, a nonprofit Metro.

And then we joined as a member of uh Metro.

And so and as part of that, those bylaws, that formation document with Metro, um the the document contemplates that if you're going to exit that agreement that you get the agreement of the other parties, and and and part of that agreement involves getting uh them to agree to take on our financial obligation.

So obviously a significant amendment um and it would require unanimity of it.

So supermajority vote, but that effectively becomes unanimity um to make that amendment.

And failure to pay um the um assessed fees results in a 12% interest um fee on top of that they can collect in addition to all the sort of remedies you can seek under law.

The the agreements do not limit the the remedies.

They're they're able to seek all remedies under law, and so what you said is is correct.

And so those are the two sort of foundational documents, and then we also have um a master agreement which deals with small some more of the specifics on how you figure out the fees and sort of how you calculate everything.

But to sort of unwind it to sort of back out of the agreements involves going back and amending those bylaws and um it really doesn't contemplate the bylaws the way it's written, doesn't contemplate that you'll just stop service that one city can stop service.

I I don't think they foresaw this, or maybe it was also to ensure that Temp B, as if Tempe decided not to um back out of um the agreement.

The idea was that no, you can't just sort of walk away, Temp B.

Um we have to have the light rail go through your city to make it work.

So it doesn't contemplate one of the end users sort of just um stopping service and how you unwind that.

So we'll have we'd have to go back and amend the agreement.

Um but as agreements right now, the other two parties would have to agree to take on our financial obligation.

That's that's basically what I recall of the conversation, so thank you.

And uh I I was I was a bit surprised to see it again so soon, but thank you, Mr.

Butler.

I understand why we are seeing it so soon.

So the the bottom line is my understanding is it's a contractual relationship that uh at the time um the various councils felt was the uh uh appropriate decision to make, and we've bound ourselves into a very tight agreement that would be very difficult and perhaps very costly to exit.

Uh mayor and council, I think that's that is a fair assessment.

Uh and and I you know it ends up becoming almost this binary uh decision for council, right?

Um with one being not really a uh reasonable decision of getting sued and paying the money plus 12 percent.

I'll I'll also point out um that there are also audit provisions within the agreements, and so that we can also look for ways to try to save more money.

Um Jody just articulated how uh Metro has done that internally themselves.

Um but we can also sort of, you know, we're a member of this organization.

Um, and so we can also look for ways in which we can try to drive down the costs as opposed to sort of being stuck in this you pay this amount or you get sued for this amount plus 12 percent.

I I just want to offer another alternative of we can all we're a member of this organization, we have audit rights, we can look for other ways to try to drive down these costs.

Well, and uh sorry.

Just a final comment.

Um I'm not I'm not trying to start a policy uh related discussion here on the pros and cons of light rail or rapid transit or whatever.

Uh I'm just simply trying to put on the table the issues at hand, the risks and the liabilities involved with any decision that we make here and the obligations that we've entered into.

So just to put those issues out there because they are, in my view, and I think you've reinforced that they're they're very binding.

So thank you.

And and Mayor, um, mayor, vice mayor, and counsel, let me just assure you, too, um, there is intense scrutiny that not just Mesa but the other member cities put on this this budget each year.

Um Jody needs a bodyguard sometimes when she goes down to Valley Metro because she she questions everything, uh a lot of oversight.

Um and and it's not just her, it's her her counterparts in the respective cities that um challenge them, just like you challenge us um as they as we sit as board members.

Uh Councilmember Heredia and his role serving on the board, um Vice Mayor Summers had a stint several years ago on the board, and every council was bus.

Yeah.

Oh, yeah.

There's nothing to do with the yeah.

Oh, yeah, that's right.

That's right.

Um but we of the regional agencies, though, we sit and and um in oversight of them in the same way.

And so that is the first line of defense is that we want to make sure that we're getting the best bang for the buck that that we can out of these um agreements, and and uh, and then we we have that at the staff level and at the elected official level at at the board.

So um we try to do that.

The other thing that we should should mention, and forgive me if belaboring this, because I I think we talked about in January, but the Mesa made the intentional decision years ago that we would start shifting some of our funding, knowing that light rail um at that point we had not even expanded to to Gilbert where we are now.

We we paid for a lot more of the bus network uh locally out of local funds.

So knowing that um we were going to have to start taking on the burden of light rail cost, we started shifting our bus funds to our regional dollars, drawing down Prop 400 and now Prop 479 dollars.

So that's why you see that out of we get 41 million dollars of service, and it only cost us locally five million dollars in order to leverage 41 million dollars of service.

What that did though was free up the money that we were uh in the past using for the bus lines, and now uh we shifted that over to pay uh for light rail.

And it's not a dollar for dollar, but that was to take the burden off, knowing that light rail costs were going to grow, and you we couldn't use regional funds to pay for operating cost of light rail, but we could use regional funds to pay for operating costs of bus.

So that's uh a decision council and and and previous folks had made in order to lessen the burden of what the overall transit impact would be to our local funds.

Councilmember Heredia, I know you think you have a question.

Well, a comment and a question here, um, you know, to comment on kind of I've been serving on the Valley Metro Board for years now, and um, you know, Mesa is always engaged in the various different committees we established about a year ago uh or a year and a half ago, uh various committees looking at governance, looking at our budget budget operations.

Um the CEO uh comes from a uh maintenance and operations background uh out of San Luis when we hired her a couple years ago, and she's really I think helped us focus more on um you know doing uh an analysis, how we can save some money, uh adding the right people, uh and uh and removing positions that were unnecessary.

So uh I think I I wanted to add that piece because Mesa's integrated in all those discussions based on our role as a major city, uh having bus and and light roll service, and so it it's been uh it's it's always a challenge.

You know, Valley Metro is uh is a big regional network.

The city of Phoenix is a major player because they operate um uh some of the the most uh bus uh operations in the West Valley and and in the city of Phoenix and has to work with Valley Metro together to kind of figure out those operations.

So it's is definitely uh um not an easy feat uh you know, having 19 cities um uh on the board, uh, but it's it's something that we really honed in on on cost savings uh and looking at operations and uh in a question, Jodi.

We also I think uh some of the costs we we we we did a various different surveys and security was one of the top items, and we we changed our security uh vendor as well.

Uh I think early last year, or uh forget the timeline, but some of those costs I think also reflect on the addition of vending doing an RFP and getting a new security vendor that was uh a lot better than the previous one, I think.

Um and we I think we've had some success on retaining people and having more visibility out in the in the light rail stops.

Um but it remind me again, Jody, if that's the the uh the timeline there.

Um yes, Vice Mayor Summers, Councilmember Heredia.

Last May Valley Metro entered into a new agreement with the new security vendor, and um they've stepped up their enforcement, they've stepped up their visibility on the system.

Um as a result, I don't have the number in front of me exactly, but I can I can get it.

They've they've um reduced their security incidence to I think like two or three per hundred thousand boardings, which is a pretty impressive stat.

Um given the perception of security and on the light rail.

So they uh they are making uh great strides, and some of those some of those great strides to increase security does come with some little added increased costs.

All right, Mayor Freeman, did you have something to add?

I do, Vice Mayor, thank you.

Jody, how are we doing looking at efficiencies?

I know uh my my first question is about the light rail.

It's pretty much a fixed route, and its costs are defined by its maintenance, operation and maintenance, correct?

Yes.

So with that, we do know that that light rail has a fixed cost, other than the security component.

However, the bus routes is another part of it that we participate in.

And looking at efficiencies and survey routes and ridership, some of my questions would be is ridership increasing or decreasing, saying the same on light rail and bus routes to help define which routes are efficient for our community.

Yeah.

Um, Mayor, when it comes to ridership, um, if I can back up first, Valley Metro um, with the as Councilmember Heredia alluded to, they hired um a new CEO, Jessica's been there four years now, and she's really put in emphasis on bringing in talented and qualified operations and maintenance people into the system, things we didn't, and they're doing things we didn't have before.

Um, as far as um things that you know, scheduling out balancing out costs increase and state of good repair and so it's not a peak and valley um type of system, so it's more stabilized.

Um when it comes to ridership, light rail, the stats here, the fiscal year 26 stats are only through April, so we still have more time remaining.

Light rail compared to our peers is bouncing back more consistent with what's happening in the nation.

The bus is not, and that is partially due to a couple things.

One is getting back to four set prop 479.

Um, as we were transitioning from one proposition to the other, we didn't want to invest more into bus service to go through the bus network redesign program that may have to, we may have to go back and cut that service.

We wanted to um, so we haven't made any adjustments to service, and in some ways that it's challenging on the bus because when you're operating a 30-minute frequency on the bus, um we you get better ridership when you're operating a 15-minute frequency because you don't have to, you just know it's coming every 15 minutes.

Where when you're out there, you don't know if it's come if it's a 30-minute frequency, if it's coming 15 minutes or 25 minutes or 30 minutes.

So we expect after we get through the bus network redesign program and implement that um that we should start seeing more increases in ridership and a more efficient system.

Um, and the plans right now, the schedule calls to make some of those um those changes in the October 2027 service change.

It takes, and I know it seems like a long way off.

It takes a while to go through and do the public comment period, and then all the routes have to go through a Title VI analysis.

Um, and then there's more outreach that has to come, and then there's this the schedule, there's just a lot of steps that take into doing this.

Tied up in red tape.

I just also for the public, just want to clarify too, and you can correct me if I'm wrong.

I did a little bit of reading through Valley Metro's website, and it when we look at ridership, there are sensors that basically scan the passing of a person or an object, I'll say, on and off of the light rails.

So we're not looking at new ridership, like technically the same person could ride the light rail over and over and over again, and it would just be saying this is a rider, this is a rider.

So it could be not a way to say like we had 25, 2,500,000 riders, and out of those, uh, half of them were new.

It's it we don't have a way to like analyze that data, is that right?

Um, Vice Mayor Summers, Councilmember Taylor.

That is true.

It's um it's kind of like the same as like you don't really know how many new drivers are necessarily on on operating on Main Street.

Yeah, you can't you can't test that, but we do have the buses and rail cars do have automatic counters at the doors, and Valley Metro reconciles those counters with the fares and and has it has a formula that they do to get the trip count.

Right.

So we're just we're just saying this is the total number of riders though, but we really don't know how many people are actually like being added to it as new riders.

Um probably not, but Valley not specifically year from year.

Valley Metro does um every three years they do a um onboard study, and some of that information comes through that as far as you know how long have you been riding Valley Metro?

So you can through a question like that, so you can tell whether they're in like a newish period or a long-term.

Okay, okay.

Thank you.

And and Vice Mayor and Councilmember Taylor, they can use some of this data to kind to really ascertain like who are maybe special event riders versus who are daily commuters that are utilizing it.

So, like during the the NCAA women's final four, um, light rail had a major uptick during that time with people you know, parking and riding into Central Phoenix to attend the games that weekend, and so they're able to ascertain that data of seeing okay, was what's different on this weekend, why did ridership tick up?

You know, why was there a concert?

Was it was there a special event, was there a major convention uh going on somewhere along the route, and so they're able to kind of flush out who are the daily commuters, who are the daily people that are utilizing it versus special event riders or um weekend riders or whatever the case may be.

But it's not down to the person level, like you like you said.

So I don't think we can really keep the um benefits of the light rail isolated just to riders as well.

Um the amount of development and successes that have occurred along the light rail lines have been significant.

Um I know for Mesa, we wouldn't have got ASU, we wouldn't have got cul-de-sac, we wouldn't have got over a billion dollars of investment in downtown.

It's part of the equation of building this area, but it was significant because before light rail, it was very depressed.

But that was the start of starting to get the building blocks in order to transform it.

So as much as you can, you know, say whatever the ridership is, then we have to also look at um transit, especially light rail as an economic tool and asset.

And I want to remind us on our general plan 2050.

Um it visions a future in which everyone has access to an efficient, safe, and well connected transportation system, regardless of age, ability, or financial means.

So that's our overarching vision of um mobility in Mesa.

And transit is an important part of being able to provide that to everyone.

Um addition, we can't ignore how much money we spend on our roads on the Prop 479 half cent uh sales tax, two-thirds of that money goes to our roads and freeways in the system.

We have a local um sales tax here in Mesa, which is about I think it's a quarter percent we spend on roads, and we receive um highway user fund revenues from the federal government um for our roads.

Eric, do you know what the total of everything we spend on roads is good morning again?

Um so on an annual basin basis for operations and maintenance of roadways.

Our department budget is uh it's 58 million dollars for next year.

About I think when we gave our budget presentation in March, roughly half comes from the local street sales tax, half comes from from HERF.

Um, and then we have an additional 30 million dollars that we use, and that's split between HERF and local street sales tax for um for lifecycle projects.

Sorry, I had my mind went blank there for a minute.

So I think you know, from a roadway operations and maintenance standpoint, we're spending about 90 million dollars a year.

Yeah, yeah, and then that doesn't also factor in the public safety.

We have part of our um police department um that responds, especially if there's an accident and also in and has um fire as well.

So there are costs to any kinds of transit, and so I think we keep to our vision and can keep growing with the vision of being multimodal, it is the way of the future.

Thanks.

I appreciate the conversation just as a reminder the item that we are considering is a contract.

Correct.

So you have to decide whether we're gonna continue with that contract or if there's a different direction somebody wants to take.

But there clearly are obligations that date back nearly nearly 30 years at this point that have to come into consideration for that.

Mayor, did you have anything you wanted to add before we move on?

Yeah, just summarize.

Thank you, Jody.

You're a great asset.

The community for your knowledge, so you can't retire anytime soon.

You can't be employee of the month either.

I already said can you make that a formal motion and uh we'll remind you of that?

Yes, exactly.

Just to summarize, we're looking at efficiencies in all the programming we do, and I I know that what I started out with the light rails, the fixed cost, it's a fixed asset.

The but route bus routes can be managed in different ways based on the survey of ridership.

So that's what I'm looking for is efficiency and the bus ride routes to uh help our residents in our community at the lowest cost available.

So thank you, Vice Mayor.

Absolutely.

Are there any other items on the agenda that's I I just want to make one comment on this one?

That um my questions were, as you said, to the contract.

What's our legal obligation and what are the legal consequences if we don't fulfill those obligations?

And I think that regardless of our philosophy or our thoughts on the light rail system.

And um none of us were here, I don't think when we entered into it originally.

So um, right, this is about what our cop our contractual obligations are and if we're gonna fulfill them or not.

That's the question.

Thank you.

Thank you so much.

Thank you, Jody, for your time.

I appreciate it.

Any other items on the agenda?

Going once, going twice.

All right, let's move on to item two A here a presentation, discuss an update on the development of the downtown restaurant and food incubator and the lease agreement with first local first Arizona to operate Main Street Market.

See, food will bring everyone together right now.

So that's two pages of liquor license.

So, what do you got?

How cool is this?

Thumbs up.

Good morning.

Vice Mayor, Council members, and voices from the sky.

This morning, uh Jeff McBay, manager of Urban Transformation.

I'm pleased to be here with Kimber Lanning, CEO and founder of Local First Arizona.

This has been a number of years coming, and I'd so forgive me, I'm gonna take a moment to recognize some hard work from some folks in the audience.

Um you know Jimmy Chiraccio as the uh the executive director of DMA, but before that he was a project manager and urban transformation team, and he was the project manager for this project uh and took it probably 90% of the way before um taking on his new role.

Um also recognize uh Madison Cox who picked up the ball and took it to the finish line with the lease, and then Bryce Al Bretson is our is our engineering project manager, and the coordination of design and construction on this project has been really good.

And uh Bryce has served uh served really well in getting this project as far as this been.

So it has been a while, and some of you were not on council when we started this project.

So I'm gonna give a brief overview.

This is an ARPA funded project.

Um in 2022, we purchased 11 West Main Street to develop a restaurant and food incubate food business incubator, really with the goal of creating resilient small businesses that will support our economy in the future and can stand and be stand up against any um challenges that may be faced, such as a pandemic with a real goal of long-term goal of growing businesses that we can then um attract to stay and and start their permanent locations here in Mesa.

Throughout this project, we've always had the goal of creating a first floor that has a public food hall that is essentially a uh training grounds for future restaurant tours.

We've also designed the full building to include a basement, which would have additional classroom space, a production kitchen, um, and additional facilities that would then support the the development of food businesses such as caterers or your your or your local salsa maker.

As the city's first ever designed bill contract, um we did do developers or contractor selection.

Um 180 degrees design build was our contractor, and they contracted with Holly Street Studios to be our architect.

I just want to note that this has been a good experience, and that design build as a as a construction delivery method has proven to be uh a beneficial and c cost containment as well as as being able to address issues as we go through construction.

Um note is the contract did include the final design for the entire building, meaning all the improvements that we had uh and contemplated for the first floor and basement.

However, due to just cost of construction issues, the basement is only constructed will only be constructed out to a warm shell condition.

Um, but it we will have completed all the mechanical plumbing, electrical um improvements that will allow the um build out of the basement in the future.

Overall, the the contract amount for construction was about four and a half million dollars.

I'm gonna take a moment um looking at this slide to to note that this building has um had many lives.

This was the original location of Xeno's co-op, which was which burnt down long ago, and then was replaced by the current building, which has been grocery stores, it has been a bank, it has been a Catholic bookstore, and when the city bought it, it was well on its way to becoming salon suites.

Um I leave this picture up because it was the right supermarket that is kind of the architectural design inspiration for for the exterior architecture.

So just a look at uh uh some of the renderings um going forward.

Um I I I put up the current construction photo of the exterior just because I think just by removing the stucco and some of the things that were tacked on, even in construction stage, it looks better than it did before.

And so it's got much further to go, but it's it's going to be a very nice presence on the street.

Um, I'm gonna let Kimber jump in as she'd like, but uh this is starting to see how the building has is coming along.

I will note that that construction photo on the right is about a week and a half old, and we're at that stage in construction now where you go in there at any given day and it changes.

So we were in there just just earlier last week, and the the amount of uh uh progress from this point is pretty significant.

Yeah, huge progress.

So Vice Mayor Summers, members of the council, thank you so much for having me.

I look forward to continuing our longstanding relationship.

I just wanted to jump in on the design work here.

Um we're working in partnership with Holly Street Studios on the on the interior design, the food hall at this point.

The idea is that the permanent infrastructure will take on neutral tones so that each of the individual concepts will be able to bring their own brand.

So while this looks, you know, uh it looks sharp, it also looks muted compared to when we're gonna have the signage, the brands, everything that's gonna pop out of each one of these booths as you make your way down the food hall.

So as you you probably have not visited this building, uh, but when you walk in down the left corridor, you're gonna have seven food concepts with a bunch of seating on the right hand side.

Um, and the old bank vault is there, which will provide uh private dining area that holds six to eight people for meetings and gathering spaces, things like that.

So this additional rendering shows uh the way you'll be able to sit at the bar at some of the concepts.

There's gonna be two hot concepts with overhead hoods, and then there'll be what we technically in the industry called cold concepts, but that doesn't mean they're serving just cold food.

Uh it just means that they're not um actually cooking on a grill and needing a hood.

So that could be panini sandwiches, it could be, you know, uh bagel shop that does sandwiches.

There's a variety of things that that could go in there in the in the cold concepts.

So there's a variety as you make your way down.

Uh it's gonna be a great place to bring your family where if every family member likes a different type of food, there'll be a variety of things in there.

So now that you've uh got a sense of the physical.

Well, I guess we should mention that no no good modern public food hall would be complete without having uh the option for an adult beverage.

And so this is an image with the the bar at the back of the of the food hall as well.

Um but now that you have a sense of the the physical space, I'm we're gonna let Kimmer tell you about local first and and the program that's gonna be behind our public experience.

Fantastic.

Thank you.

And I want to thank you again for the long-standing partnership we've had with the city of Mesa.

For the last 10 years, we've been in the downtown core.

I'd like to just let you know that I first moved to Mesa in 1985 and I opened my first business here in 1987.

Um we launched our incubator kitchen at the El Rancho Del Sol property in 2008.

Um that is not just a food incubator, um, but really it is a model that is standing up, uh, and we are getting inquiries now from around the country about our partnership with the city of Mesa and the work that we're doing there.

So out of 2500 square feet, we are incubating 20 food entrepreneurs, and those could be consumer packaged goods uh like a salsa, jelly of jam.

It could be uh catering companies, it could be food trucks, and it could be people who are aiming toward opening a brick and mortar restaurant.

Um, and we've um also integrated kids' cooking classes, family meal planning and nutrition classes.

Uh we have uh twice a month an actual food pantry where we partner with United Food Bank and make food available to the families who live on site.

Um, in addition, we take that and um work with the entrepreneurs to help them in the kitchen, learn how to work with other people, learn how to partner, learn how to share space, learn how to run quality businesses.

Obviously, everybody in there has to be properly licensed, they have to be standing up their LLCs.

When we start working with people, often they are still running their business out of their personal accounts.

So it's two years of incubation, and as they work through that program, uh they take flight.

And uh I'm really proud to tell you that um we have a 78% success rate after five years, which for those of you that follow the food industry in any way, um, that's an outstanding success rate.

Um, generally speaking, uh more than 50%, significantly more than 50% of uh particularly brick and mortar restaurants fail.

Just a little bit about us, we are the largest local business coalition in the country, and we run multiple business accelerator programs, including uh Fuerza Local, uh WeRise, we run a loan readiness boot camp.

We found that many of our small businesses don't have the resources they need to properly understand when they walk in for a bank loan, uh, what they're gonna need to qualify for that.

So we've developed a wide variety of projects and programs, many of them in partnership with your own economic development team to provide technical assistance to those businesses to make sure that they are successful long term.

So, next slide.

So uh an incubation program, uh, for those of you that aren't familiar, there's a lot that goes into it.

We work um with quarterly business consulting and workshops.

Uh, when you're running a food business, a lot of that work uh is around food costing.

Many of our small businesses, they might be very excited to tell you the most popular item on their menu, but they can rarely tell you what their most profitable item on their menu is.

And we work to help them understand profitability, reducing food costs, and uh thereby reducing food waste as well.

If you ever walk into a small restaurant and you see that they have a 17-page menu, um, I can guarantee you they're not making any money, right?

And we try really hard to help them narrow that and be really good at what they do rather than trying to be all things to all people.

That's the beauty of this food hall, is they can be really good at that one thing, and yet it will be one space that has many things for many people.

Uh we also offer a wide variety of connections to new revenue streams, helping them think about if they are a brick and mortar, what can they be doing for events, what can they be doing for special uh catering things that they can do on the side.

Uh we offer them a variety of development templates so that they can really better understand their business model and walk away from the two-year incubation program with a business model that prepares them for this food hall.

Um they have to have come through a program so that they can um be prepared for the food hall.

So when you're thinking about the food hall, please know that these are going to be people that are well on their way, not people who are just starting.

They they started our incubator kitchen down the road at the El Rancho, and then they come through that program, land in this food hall for a two to three year time period.

Um before we're uh working with realtors to keep them uh right here in Mesa.

That is our goal is to is to grow businesses that stay right here in Mesa.

I want to uh name that our uh current incubator kitchen.

Uh, we offer space in the kitchen at approximately 25% market rate.

Again, our it's not free.

Um our our goal here is is not to subsidize small businesses, but rather to give them a longer runway to make sure that they can be successful in the long term.

Uh and they're they're uh offered um ongoing mentoring and support from business professionals at local first Arizona.

We also run the Devour Culinary Classic, which is a culinary festival that has won awards from around the country, and we bring in the top chefs that we have to work with our our startups as well.

Uh next slide.

So I mentioned before we have a variety of business incubator, business accelerator programs.

This is our sweet spot.

Um we believe in our core that entrepreneurship is a pathway to self-sufficiency.

We work with family-owned businesses, and we are we aim for uh generational wealth so that we can uh change the directory, the trajectory for some of these families.

Um I also want to mention we do a lot in the farm to table space.

We support local farmers.

We are working with our entrepreneurs to source locally.

We work with a good number of producers in the Mesa area.

Uh we also have a workforce training component for hospitality, working with youth to get them into hospitality and to think about management and other types of professions in the hospitality space.

Um and then I really want to underscore here that when we're working with our small home-based businesses, we strictly adhere to all the cottage industry laws to make sure that our businesses are completely legitimate and registered and following all food safety guidelines.

So when they come out of that two-year incubation program, they are fully equipped and ready to go.

Okay.

Um so to bring these programs this program about, um, we will we are proposing a lease with local First Arizona to operate the restaurant incubator.

Initial term of that lease would be 10 years, and upon mutual agreement, there would be the option for three five-year renews for a total term of 25 years.

Um given that this is a program that is intended to bring benefits to the city through the development of new small businesses.

The rent is um set at 10,000 per year for the first 10 years, and then with each each five-year renewal, it would go up $5,000 per year.

Over the course of the 25 years, that would total around 400,000, which would be held in a separate um held separately so that any landlord costs that the city may have say building maintenance, if we had to replace an air conditioner or something along that line, that the rent would then pay for to be offsetting those costs.

Um it's also important to note that the given the nature of this building, um, it is essentially a commercial kitchen, public food hall.

The OM responsibilities are typical of a commercial landlord tenant um relationship.

So, as part of the lease, there are obligations, would be obligations of local first to provide that incubation program.

Um as I noted, we have are doing full build out of the first floor, and with the first floor build out, the local first would have to have a minimum of five annual program participants, essentially the the food providers at the stalls.

Um there would also be provisions to be able to allow up to two mentors.

Those would be maybe some more established um restaurant tours that would be participating in the development of these small businesses as mentors, but also providing somewhat of an anchor to the to the restaurant spaces with the build out.

Uh there's I should go back.

The lease includes provisions that will allow um local firsts.

They are leasing the entire building, including the basement.

It includes provisions that would allow local first to build out that basement.

And if that basement were to be built out, that that would increase the annual participants that would need to go through the pro um incubation program up to 80, um, as well as uh additional program classes that can be supported through the classroom space in the basement.

Um if there are any profits, local first would be required to invest those back into the program development and delivery.

And we have also included some provisions on on open hours so that this is a public food hall, so that we do expect it to be available to the public six days a week, eight hours a day, and when it is open that there's a minimum of four vendors um operating.

Because this is ARPA funding, and we are as a city gonna have to report back to the federal government.

Um local first will be required to provide us with quarterly reporting on their uh metrics of of delivery of the incubation program.

Yes, excuse me.

Yes, mayor.

Um I just wanted to pause for just a second on the basement about the build out of it.

Um wouldn't it be less expensive and more beneficial just to look at doing that now instead of later, like we've seen on a lot of projects where we wait until we do it later, and it's so much more expensive later.

Um I read in the council report that it would take approximately six hundred and fifty thousand to a million dollars, um, which includes classroom production packaging and marketing space.

Um can you expand on that?

And are there grant opportunities?

Um things, you know.

I'm just looking at maybe maximizing, I think there'd be less disruption to consider that now than later, and get that being having a return on our investment of this entity.

Um Vice Mayor Council.

Sorry, Councilmember Heredia had uh sign off.

Uh Vice Mayor, Councilmember Duff.

Um it was a difficult decision when we when we had to essentially value engineer the full build out of the basement um out.

Uh the the most expensive elements of that basement build, the the mechanical, the plumbing, the electrical, that is already done.

Um what you would see in that 650 to a million dollar, the the majority of that cost really is around the the production kitchen, those are very expensive.

But the the the you are accurate in that doing construction of the basement um while under construction on the first floor will definitely be would be definitely be a much more efficient um way to deliver that the the basement if uh construction has to occur um after um the first floor is operations there will be significant disruption um and it will be more costly simply because you know the the cost to remobilize the cost to work within an environment that's open is it will will have a uh a cost to it.

Uh Vice Mayor Summers, Councilmember Duff, um I do think from a cost savings perspective, it would be smarter to make the investment at the same time we're under construction.

We have the crew on site, they have a deep understanding of the site.

We would not need to bring them back at a later date at a much higher rate.

What it enables us to do is add necessary classroom space and office space for these businesses for the one-on-one coaching for the incubation and additional classroom space so that we could be teaching on-site other business accelerator programs that we have.

Um so uh you know uh it my advice would be to really consider doing it at the same time as a long-term investment so that you don't have to come back and pay more for it later.

And and I I I should have noted we we did um seek an opportunity for a grant um this year, um, the Gressurly Directed spending uh opportunities through uh economic development administration.

We applied for a million-dollar grant.

Um unfortunately we are unsuccessful um this time around for that.

And but we will continue in and and Kimber and I have been and talking on what other grant opportunities are out there, but we definitely are going to continue looking for those grant opportunities.

I have a quick question along that line, if I may.

Um Kimber, you're doing good work in the community.

Thank you.

Thank you, sir.

Um the basement, are we talking just classrooms, or did I hear commercial kitchen?

Are we gonna put a uh a hot kitchen down there?

Um uh Vice Mayor, Council Mayor Adams, uh a production kitchen, yes.

Uh so we need a grill, a hood, ventilation.

I I have a little bit of knowledge about this.

My son is in this business and operates a commercial kitchen.

So I know about hoods.

So when it comes time to put in the hood and the ventilation system, the fire suppression and all that.

Obviously, you need to vent that up through the space on floor one.

So, what does that do to the daily operation of the kitchen when we get ready to do that?

Vice Mayor, Councilmember Adams, um Kimber knows this design way better than I do, but I think the the short answer is that we've we planned for that.

The design already takes into account the the basement having a production kitchen and needing the venting and all that.

You have a shaft in place.

So that's a good yeah.

Thank you.

You want to finish up and then we can um we have a planned completion of construction in October, so it's with that that I can say that within five short months the city will have met all of our obligations shown on this slide uh under the lease.

And then Vice Mayor, with that, we're happy to uh have any.

I was really finishing up.

Yeah, yeah.

We will be back.

Um this will be in front of council on Monday for for action.

Uh again, we intend anticipate completing construction in October, and after a couple months of of ramping up and and and prepping the space that Kimber will be prepared to start operational the incubator in January.

Councilmember Taylor, and then I think we have a uh a resident local farmer that might have thank you so much.

Oh yeah um I was looking at your website, and I was trying to understand your milestones.

Um maybe I missed it, but could you give us all an example of a restaurant that's currently open, operating, and just doing excellent, maybe maybe even two that have come from local First Arizona.

Sure.

Absolutely.

So uh the first one that comes to mind is Calados Coffee and Crates.

Uh they graduated through our Forza Local program, family owned and operated.

They have a location in Goodyear, a location in Avondale, and a third one in um Central Phoenix.

Um they're a success story in my mind, not only because they have three locations, but um by the time they went to open their third location, they actually qualified to purchase their own building.

So um we we now have from our Forza Locale uh program, we have um eight companies that are doing greater than 1.5 million in sales, and they came from below the poverty line less than eight years ago.

Did they start in a food hall like this one?

No, Calado started in a very small suite in Avondale, and they've expanded that site and then added a second and then a third.

Okay.

Another example would be Chilte, which just won a uh James Beard award, and they operate on Grand Avenue in uh downtown Phoenix.

Nice.

James Beard's good.

Yeah.

I don't think we can forget maybe the best pizza in downtown at Goten Ram pizza as well.

Yeah, Goat and Ram uh came through our incubator kitchen program, uh, and they operate here in downtown.

And then food in terms of food halls, would this be similar?

I'm trying to imagine what this would look like to kind of what Gilbert has built out over where the garage ease spaces, you go into this building, there's a lot of different places where you can eat, you have different options.

I know that's a different look, but I'm thinking con conceptually.

Conceptually it is.

There are multiple different um food concepts in there.

It is that is a much bigger space, so it's it's not like as concentrated.

Um, and there's a lot more indoor-outdoor space there, but uh conceptually with a variety of food, uh, we will not have any retail, they have retail uh and they have maker space.

Um so but but you're right in thinking there will be multiple concepts in one area.

Okay, and is this is this something my uh local first has done for quite some time in terms of this concept of food halls being kind of that next step in the incubator program?

I I saw a few of them on the milestones.

Yeah, so this will be the first concept like this one.

This will be completely unique.

In fact, this will be unique in Arizona.

There is not another concept like this in Arizona.

Um but our incubator kitchen program, we have five of those around the valley with a sixth one opening in the Garfield neighborhood in Central Phoenix.

Okay.

Uh and each one of those is incubating anywhere from 18 to 24 businesses at a time.

And we've been doing that for eight years.

Okay, thank you.

Um this Jeff, this question might be better geared for you.

In terms of outdoor, I feel like outdoor eating space is kind of crucial in Arizona while we have seven months of like absolutely beautiful weather.

Uh are we building out for people?

I didn't see that in the concept.

Maybe I missed it.

Um really nice.

Mr.

Some oh, okay, that's the little porch area, right?

Um, Vice Mayor, Councilmember Taylor.

The build the one of the new unique features about this building is that recessed entry.

So it actually gives us a really great starting point for outdoor dining because you have some shaded space being on the south side of the street.

You also get better sun protection.

So any addition out uh you know, extension beyond the face of the building with additional patio seating is actually a really good opportunity.

It's probably about a 25% increase in total seating over what's inside on the outside as well.

Yeah, there will be uh nearly 40 available seats outside.

Okay.

Will there be like is that a pergola overhead, some sort of maybe some greenery?

Yes.

Uh this is so this is an earlier concept.

Early rendering, but yes, the the the space is going to be uh attractive.

We're and I don't know whether I don't think we have misters built into it, but we don't have Mrs.

Built into it, but there will be greenery.

I know a guy if you want some.

Okay.

And he's got a Mesa.

It's not my husband.

Uh we're envisioning umbrellas as well.

Uh when it uh beyond the overhang, right?

Which is it's it is a deep recessed entry, but we'll have him.

They're welcoming yes.

Okay.

Great.

Thank you, of course.

Thank you.

Mr.

Butler, question has there been any discussion with your staff about trying to find additional revenue for the build-out or at least the major mechanicals that would cause the greatest level of disruption.

Well, I think it's as Jeff Vice Mayor, uh, as Jeff articulated, the the major mechanical is included in the current uh scope and phase that's being constructed right now.

Um as far as finding additional funds to go ahead and finish out the basement.

Um we've had a whole of about uh 30-second conversation as council was discussing this, but um if that were to be council's desire, um staff could go back.

Um let us have we could have some conversations and see if we could um identify those funds and and if so we could we could bring uh Jeff, would it be an amended contract then to the I don't know how engineering would I might I might ask Bryce to come up to correct me when I get this wrong, but I believe our contract with the design bill contractor would allow us to essentially just add this as a a scope addition versus having to amend the contract because contractors love change orders that's what I heard sometimes uh Mark Mark Alstrom assistant city engineer uh Mark Holstrom, assistant city engineer.

I helped develop the design build contract with our our legal staff.

We would have to take a look at that, but it's a possibility that we could run another contract under that same selection and be able to negotiate the price and execute a contract with the same contractor.

We would have to do a little work to make sure that that that would fit.

Is there is there a timeline that they would want us to try to do that by?

Because I mean, we we have the eighth and councils gone for a while, come back a little inch live, we're gone for a while.

Or because I saw the we hope to open January of next year, so the timeline's pretty tight, yes?

So vi Vice Mayor um uh um council the the this we have had some conversations because we were looking for grant money, so we had to have a conversation of uh from a timing perspective.

There is a narrow window of opportunity to be able to can maintain that completion in October and opening out in January.

Um if we were to build out the basement as well.

I mean not that that doesn't mean that those openings and completions can't be pushed off it to allow the basement build.

I think Kimber would probably be more than happy to to open in February if that meant the bit it included the basement as well.

That is true.

I think in order to maximize the cost savings uh with the con contractors on site right now, we'd need to tie it together.

Okay.

And then is there some of the things that we're gonna do?

Yeah, um we could if if that were to be the direction of council, we can we can work through this with engineering, come up with the timing.

If the next July meeting isn't fast enough, we could always do a quick Zoom meeting if we needed to in order to meet any any timelines to keep the project on on track if that were to be the direction for the obviously that would be the mayor's decision with you.

Okay.

So can can you just clarify funding on that though?

So we have ARPA funding covering what we the first floor and a shell.

And we're talking about it would be it would be cost saving, obviously to do it all now.

What is the funding source?

Yeah, and it mayor and uh council member go forth, that's what we would need to go back and look at too.

And so we would look we would need to huddle a little bit.

This is this is new.

I'm not saying it's a bad direction.

Let us just go back and and look at what um we might have available to to make that happen.

But ARPA has covered everything up until all the build-up up until and then what what do we do for you it looks like we're we're responsible for major systems and structure, which is typical in a landlord tenant relationship.

And so we just that will um just be a normal contingency general fund sort of any other now now that um mayor and uh council member go forth.

Now that we've really torn the building down to the studs and rebuilt it, um hopefully you know the the bones are good, and now since it's gonna be a priority to make sure that uh we're keeping up with our uh maintenance schedule.

Um we'll we'd like to maintain that that building uh as well moving forward.

So the plan is just to be a good landlord and make sure that we're properly maintaining so that we don't have major items that come up anytime in the near in near term.

And we have rent coming off of it that I assume would be set aside for improvements, repairs, anything structural.

So we'll have the money through the rent to be able to, you know, it won't be an additional cost um cost.

I wonder I'm sorry.

Uh can you uh Mr.

McPlee, can you bring back the slide that shows I think you had one that showed uh uh the various responsibilities of the two parties uh uh is that here uh okay here yeah here we are.

Uh the only the only question I would ask is the comment was made that city responsible for major systems and structures typically in a triple net lease, that's not the case.

I'm not objecting to it, but just for clarification, and typical triple net lease, um the tenant puts the new AC unit on the roof, not the landlord.

Anybody argue with that, but that's typically the case.

And I'm not arguing, I'm just saying that let's point that out and realize that that's what we're assuming because we're trying to accomplish something here with a with a not-for-profit that we're making that concession where normally triple night, you know, if your AC goes out or something else goes out, that's on the tenant.

We're we're reversing that situation.

I guess my thought would be too, is in addition to being a nonprofit, this is also an incubator.

And so we're we're kind of in putting a little bit of our own investment into it to help small businesses grow.

Yeah, we're we're we're we're uh and it's gonna be a brand new AC.

So the likelihood that this breaks is pretty of course now that I've said it.

Yeah, right.

Right again, I'm not objecting to it, just pointing out the fact that it's it's not the norm in a triple net or actual.

No, I I yeah, I agree with your point.

Vice Mayor, Council, um uh just to reiterate reiterate, uh, it's been said, but even though this is an old building, when we're done, it will essentially be a new building.

It's a new roof.

All structural issues have been addressed, all the mechanical systems, electric plumbing, heating and cooling, those are all new.

The air conditioners are new.

Um we I we worked with our facilities department because in the end the maintenance good is going to fall on them to make sure that they were comfortable that $10,000 per year in rent would be sufficient to cover any of anticipated normal maintenance costs.

And they're thinking, you know, just from a maintenance perspective, right up to five thousand dollars per year for normal maintenance.

So that would leave the ability, you know, for the first several years, we would be creating a reserve and replacement fund.

So by the time we get to 10, 15 years down the road where major systems may need work, there should be a sufficient amount of of rent reserved to be able to offset those costs so that it isn't becoming a uh maintenance folks in-house be maintaining this.

Uh and ours, I'm sorry.

Um, there is a possibility that it would be um our facilities folks, but it what this fund actually is.

But what this fund really provides is the opportunity for them to use on-call services.

That the, you know, if something happens, this is a you know, this is a commercial space and something could happen off hours.

So to be able to have somebody that they can just use from their contract and be able to send out a you know a plumber or something like that, that this will give them the ability to.

The fire alarm battery always chirps at two in the morning.

Yeah.

Well, I'm a little confused.

Because you're using maintenance interchangeably between the two entities, and on here it says local first is responsible for maintenance, and we are responsible for major systems and structure.

Right.

So when you say maintenance, that we're gonna do maintenance.

No, I'm sorry.

Vice Mayor, um, councilmember GoForrhythm, local first is going to be operating this space.

It is their space.

They if the if the air filter needs to be replaced, they're replacing an air filter.

They're if the floors need to be cleaned, they're replacing the floor and cleaning the floors.

If the kitchen equipment breaks, they're they're fixing the kitchen equipment.

Now, if the if the air conditioner just completely fails, that is a major system that the city then would have a responsibility for.

From a plumbing perspective, we are responsible for everything to the building and the pipes in the wall.

Once it gets to a faucet, that's on local first.

So it it is it is um really about the major systems that the city is taking responsibility for.

Thank you.

Um I know we have an initial term of 10 years, a local first.

I'm I have to ask the ugly question, though.

If you guys have to back out and we just have this space, what is our backup plan to continue to make an income off of it?

And now we've built it out for a very niche idea.

Um, have you had a discussion about what ifs and how we will handle that?

Because realistically that does happen.

Uh Vice Mayor, uh Councilmember Taylor, um we have not you know discussed that because we fully anticipate the local first will be with us for 25 years, but I will say that um that food halls are uh uh as you noted in Gilbert, they're uh they're fairly common across the country and they are popular.

I I do believe that if if this space ever became available that the city would be able to market it to a private operator or or or potentially a another nonprofit that would want to continue this type of programming.

But this would be an attractive space when this is complete and we we invite you to the ribbon cutting.

Um this is a very nice space that would be attractive to a private user as well.

And we've had discussions with with potential food hall developers in the past.

Um that transition to our conversation with actually the this conversation started with local first talking with the private developer about doing a food haul.

Yeah, to close out, Mr.

Butler, did you find the money?

We we we do have some options.

Let us let's scrub those down a little bit because you know, speaking off the cuff right here is is uh it you know is dangerous for everybody, but um Mr.

McVay actually has a uh a project that's gonna be coming forward that has a a one-time um payout to the city that could be reinvested into something like this, so it would be another economic development purpose going back into an economic development purpose.

So that might be an option.

There's there's there's some other we need to scrub down some of our remaining ARPA interest funds.

Um part of those were committed to uh the off the streets program by the council's direction the other day to continue with the windamir using federal funds.

So we just want to um we want to see what that balance is um and and scrub that down a little bit before we tell you definitively.

But there's a couple of buckets that we're looking at right now that we think are one-time dollars that could be utilized to finish this build out.

So then that conversation has to happen about what the alternatives are as well.

But this this sounds like a great program.

I think there's interest in seeing it built out.

It's more cost effective to do it up front.

That's great for you to surprise the city manager with that request.

Um we'll see how to do that.

I feel like I'll make that up this morning.

I I gotta say this is this really does interest me.

I'd love to see one out uh in on the east side um in my district mostly.

Um but uh I when I retired, uh uh one of my fellow firefighters uh she retired about the same time.

She's moved into the baking field, and she's at this transition between baking it at her home and now needing some kind of a commercial kitchen and her LLC and a license.

What does that have to do with the food?

Well, they do have uh bank vault still in there, so but no baking, like baked goods.

Or maybe my wife could do my wife could use this too.

Uh, Vice Mayor Summers will do all we can to make sure that some of these businesses springboard into your district.

I I actually already said it to her if you're interested, you should do this.

So I think it's a great program.

I'm very interested in you're making me hungry because I skip breakfast and I should not do that.

I'd like to add on.

Um can I build upon that?

Is that uh what I love about it is we're creating these local unique experiences, which we know have been the success of downtown, and being able to have generate these new businesses that go anywhere in Mesa, and we're all craving those local places across the city.

And I'm really concerned about downtown because it is our tagline, it is why people are coming here and driving from a long distance are all these uniquely local places and experiences.

But we know over time, as uh downtown continues to grow and more and more investment for a small entrepreneur to get a start and downtown Mesa is going to be difficult just because the cost per square foot is really, really hard.

And when it comes to food, there's a high, like you said, a high um rate of failure.

But it's really hard for those people to find small spaces, is really you have to really be sure footed, and this is a way for us to get them to a point they can launch and go in to that higher dollar per square foot because we're not going to be the cheapest place in town as we look into the future.

And so we're keeping that uniquely local experience in downtown as we grow, become more expensive on the rates here.

Um so it's a way to keep that vibe in downtown, which has been very successful for us.

Vice Mayor Summers, Councilmember Jeff, if I could just make one comment there.

Um, in meeting with the owner of the the theater next door, um, she told us that one of the biggest complaints she hears is there's not enough uh fast casual in the downtown area that people have to sit down and get waited on in a in more of a dining establishment.

And so we do think we're we're complementing what's already here, and we're going to be very thoughtful about the selections as well because we want all the small businesses to be successful.

But I I think it's just really critically important to understand that we're bringing a unique thing that's going to benefit the people who are already coming down for the wonderful amenities that you already have.

Do you want to close out?

I will.

And I just also want to say thank you to Kimber and local first and everything you do in Arizona.

You do an amazing job, and I'm glad that you're here and expanding what you do in May in the city of Mesa.

Thank you.

Um, I wasn't on the council when this was first agreed to for the ARPA dollars, but I um I think it was a fantastic, a brilliant idea uh and use of those funds.

So Jeff the credit for Jeff.

Yeah, okay.

Thank you, Jeff.

Thank you, boxer.

I have a feeling we're gonna see you.

Oh, mayor.

Yes, from the sky.

Okay.

Hey, I I really appreciate moving forward to build out the basement.

I think it's necessary once the construction starts.

So if Mr.

Alstrom and his team can find a way, work with legal to do that, and then Mr.

Butler and his team find the finances to do that.

I'm thinking even broader than that.

You know, we have EVIT down the road.

The we have students in their culinary program that may want to be engaged in some type and see if they're you know want to be a chef or something, and I value that more importantly too, having being uh proactive like this and providing more food options for people to come downtown, and then we have ASU mix and other programming from ASU coming in the future.

So this catalyst will be essential to look at again building out the restaurant, doing the right things, and more importantly, the city of Mesa, all of us are owners of this property so that we can make sure it continues the tradition it has been as a market and uh uh the rights uh supermarket back in the day and moving forward.

So with that, yes.

Great conversation, and thank you.

All right, you have your direction.

Good luck.

Good luck finding some extra funds, and from that we'll move on to item two B.

So we're going from small business incubation to international global trade.

Right?

Look at the diversity of the case.

Look at look at we're we're booking and ending this one.

So we're gonna hear a presentation and discuss an overview of the U.S.

foreign trade zone program and operator agreement for MGC America incorporated.

I see.

That was a tough act to follow.

Thank you for the introduction.

Vice Mayor, Mayor, members of council, Jay O'Donnell, City of Mesa Economic Development Director, and joining me today is Chris Molnar.

She is our economic development administrator in our department.

And as Vice Mayor said, we're here to share uh with you an overview of the U.S.

foreign trade zone program.

And then at the end, we'll talk about the operator agreement for MGC Pure that's on the agenda for council meeting Monday.

So the FTZ program.

Oh, sorry, yes, thank you.

I'm I'm going fast.

Scott appreciates I know he was looking at his watch.

That darn technology.

Well, it also has messages.

There we go.

PowerPoint is in 2026.

Uh so the FTZ program and the proposed action is not a special tax giveaway, just to clarify.

The FTZ is a long-standing federal program that's available to many companies who have to qualify.

Um, this is a program that is a national program across the country, regardless of size of company.

Um, Arizona's currently home to seven activated foreign trade zones.

Three of them are located in the Greater Phoenix area.

Uh one is in Nogales, uh, Phoenix, Sierra Vista, Pima County, Yuma, Mesa, of course, and then Maricopa County, which is known as the Greater Maricopa FTZ, Glendale.

Um, so that is the seven.

It is a federally authorized program, as I mentioned.

The purpose is really to encourage companies to manufacture, assemble, and invest in the United States instead of moving these operations outside of the country.

Many products today are made from parts and materials that come from multiple countries, and without an FTZ, companies can end up paying customs duties that are multiple times or make paying custom duties multiple times as products move through different stages of the manufacturing and distribution process.

So the program I think that's an important point because there are some raw materials that cannot be mined here or produced here, so they have to be imported.

And that's where what would normally be maybe a foreign job, the opportunity to bring that back to the US for US based jobs is critical to why this program exists.

Correct.

Absolutely.

So with without an FTZ, or excuse me, the program helps simplify that process and presents the unnecessary double taxation on imported components that are used in US based production and manufacturing.

So FTZs help make it more competitive for companies to keep that manufacturing, the logistics and technology operations in communities like Mesa, other than relocating them internationally.

But again, it goes from smaller businesses to large uh international employers.

You do have to qualify for the program, and um they have to meet the federal requirements to get the benefit.

It's also important to note that FTZ benefits are governed by federal law, and the oversight is through a federal board as well as U.S.

customs and border protection.

Companies operating within a foreign trade zone still pay local property taxes, utility costs, development fees, and other applicable fees and taxes.

The city's role is really to support the economic development opportunities that bring investment, jobs, and long-term economic activity to Mesa while administering the program in accordance with federal law.

I'm gonna turn it over to Chris now, who is a certified zone specialist through the NAFTZ, and she serves as our zone administrator for the city of Mesa, and it's FTZ 221.

That's Mesa's foreign trade zone.

Chris Thank you, Jay.

Um I just wanted to give um a little bit of history of foreign trade zone number 221 that we oversee.

It was established originally in April of 1997 under FTZ Board Order 883 that granted us the authority to establish this zone in what was then the Williams Gateway Airport with just a little over 3,000 acres.

And the justification for that proposed FTZ was that it offered distinct advantages and cater to different and unique market needs and conditions than what were present in foreign trade zone 75 and in Phoenix, um, allowing us to increase our international trade in Mesa, facilitate high-tech and aerospace related development, um, and offering large gauge uh large scale development opportunities with an abundance of at the time available um vacant property around the airport.

In January of 2008, um the city submitted an application uh for authority to reorganize the zone at the existing airport site, adding acreage to um at the south south side of the airport in that blue area on the map that you see on this slide, um, and removing a center area of the airport, including terminals, um landing strips, and taxiways that were not eligible for FTZ activity.

So that reduced the overall site of the FTZ to just over 2,000 acres, which is our current magnet site.

So the the inline map that you'll see on this slide um was is what we consider our magnet site.

Um and the FTZ board identifies that as a concentrated zone.

Um, so it still has the original intent of bringing in um those unique tech and and aerospace um opportunities for FTZ activity.

In July of 2002, we went through another reorganization to expand our FTZ within our entire Mesa City boundaries under a new framework called the alternative site framework.

I'm sorry, did you say in July of 2002 or 2020?

22.

July of 22.

Got it.

Okay, yes, my apologies.

Um, so when the alternative site framework came about, it offered an opportunity with the reorganization to make this transition at the same time.

The ASF allows for a simplified um faster process by submitting minor boundary modification applications with a much shorter time frame where you could be looking at under normal circumstances a 30 to 45-day approval, review and approval period for those applications as opposed to the previous traditional site framework that that took months to be able to get these businesses up and moving and taking advantage of the benefits of the FTZ status much quicker.

So we currently have two activated FTZ sites in Mesa.

Today we'll be reviewing briefly another one with MGC Pure and we have some other upcoming applications in process that will be coming to council in the near future.

So eligible activities merchandise in a zone can be assembled, exhibited, cleaned, as you can see up here, a lot of different activities can occur.

There is an additional step for production activity.

So if a business is going to be doing that in addition to those other activities listed above, they do have to go through an additional notification and approval process to do that after the FTZ board approves their original application before they can work in that status and submit any goods into U.S.

commerce.

Retail trade is not allowed in FTZ zones.

So sorry, can I interrupt?

Yes, of course.

Despite the vice mayor wanting to stick to what he calls the most important area city, I would like to ask about Falcon.

Do we not have any businesses in Falcon that have applied or operate?

Vice Mayor, uh mayor, and council member go forth.

We uh we don't currently.

However, uh, I think this as this program becomes a little more popular, you'll see more applications.

But with the alternative um site framework, we can go all over the city.

Do they would you would you think that those companies know about this?

It's not that they wouldn't.

Many of them do, and we're gonna talk a little bit about the process because this is this is a program that is not for the feint of heart, and you have to have a lot of export and import activity for it to really make it worthwhile to apply.

Okay, thanks.

Quick question, if I may.

Um Jay, help me remember when we worked on the Falcon Vision and Commission at that time.

The Falcon area was not subject to this, or was it Mayor, Vice Mayor, Councilmember Adams, I don't believe it was in the alternative site framework at the time.

We would have had to go through a special process to to do that, but now it's it's the entire city.

Yes, the entire city of Mesa boundary is considered within the foreign trade zone.

It's it's been a while now, probably a little over 10 years, but it seems to me that throughout all those discussions, it would have been a great thing for the economic development of Falcon area, Falcon Field and the surrounding area if we had this opportunity then.

Um so I just just want to clarify that.

But I think it's it's a great opportunity to attract um a higher level of business operator.

Yep.

All right.

Next one.

Um, so FTZs are especially valuable for companies that obviously are exporting finished goods from the FTZ site, their assembling products using imported components, managing a high volume of international trade, or they're building and ex and expanding their U.S.

manufacturing and or distribution sites, or looking to optimize their supply chain footprint, which is what we're seeing a lot more in the recent activity.

Um there are some additional benefits, um efficiency, so being part of an FTZ and having that designation allows businesses to streamline their customs procedures and logistics, it re removes some of that administrative burden, allowing our businesses to focus on operations, growth, and innovation.

Umancial flexibility, duty deferrals and exemptions in some cases until goods enter U.S.

commerce, aligning costs with production and sales cycles, also improves their cash flow, which helps them grow here in Mesa.

Global competitiveness, Jay talked about this a little bit, but lowering these operational costs increases their agility, helping our US-based companies compete more effectively in global markets.

So what we're seeing is while any company involved in international trade can benefit from this program.

There are certain sectors specifically that find FTZs especially impactful.

Um life sciences and pharmaceuticals, automotive and components, consumer electronics is a big one, heavy machinery and equipment, and oil, gas, and petrochemicals are the big players.

So just to give a very simple uh real world example, um, imagine if if we have a tech company who imports various microchips, parts, components, boards from overseas suppliers, they're putting those electronic components, um, they're receiving them into the FTZ, they are sorting them, they're testing them, they're assembling them into a larger product, uh finished product in within the zone.

Um, some of those units may be re-exported, um, could be duty free.

Um, others may be sold domestically at a reduced dirty rate uh duty rate into U.S.

commerce.

So oftentimes, depending on how those products are brought into the FTZ, the finished product may have a lower duty rate than the the sum of the individual components themselves.

So what that's doing is it's improving margins for those companies.

Um they're able to do better inventory forecasting because inventory control is a major component of CBP's oversight of these locations and gives them a stronger competitive edge.

I think it would be fair to say reduce costs for consumers at the end because it's not getting double taxed or taxed multiple times, is it that would be the hope, absolutely.

So I'm just shocked that we don't have any.

I mean, I know some of the manufacturing that goes on it near Falcon.

Is it because maybe they have other sites where the components are imported in how would that possibly interest?

A lot of defense industry though around Falcon Field and they make it.

Absolutely.

Well, they they're part their parts are are a lot, several of them are foreign made.

Yeah, do they directly or does their headquarters import them?

That's what I'm asking.

Yeah.

I mean, I don't know.

Maybe I would assume that and Jay Chris, I I also think that some of the suppliers and assemblers for national defense oriented activities are taken care of under other provisions of law, right?

And they don't have to, and that's not privy to the FTZ.

They that's taken care of through defense acts and other things like that that give Boeing or other suppliers to Boeing or others those those provisions.

So you're you're you're talking about non-defense sector for the most part.

And and as Chris said, I she said help help on the margins, but realistically, a lot of this, let's face it, everything she described could be done cheaper outside of the United States, right?

And this is a way to try to level the playing field a little bit, that final assembly and some of the things that could be done cheaper in Mexico or in another part of the world, uh, could actually be done by American workers here in the United States, and and that's just to try to offset some of those higher wage and and and other costs that come with doing that here in the United States.

So there was one additional user benefit that is not a cannot be a primary focus, but um there are a couple of other states in addition to Arizona that in '91 approved a lower assessment rate for activated FTZ sites from a class one property to a Class C.

Um, Class Class Six property.

So it does allow for a property tax benefit.

The property owner must submit after activation, so that's once they've been approved by the FTZ board, and we'll talk about that when we go through the process.

Um, but they have to submit a written request or application to the county assessor to um to obtain that reclassification.

And and Chris, as you uh as as came up during the Apple discussion, it's only a portion of the property that's actively involved in the FTZ activity.

So if it's part of a larger facility that may not have FTZ related activities, it's only that portion of the property that is related and eligible that would have that reclassification.

Correct.

Great point.

Thank you.

Okay, so uh Vice Mayor Counsel, as we wrap up, I do want to underscore the larger public benefit of FTZs.

Obviously, the primary benefits are for the companies, but the communities also receive significant benefit in support of the U.S.

economy as well as the local community.

Um, particularly in Arizona, we do not have a lot of incentive programs to offer businesses, and so this does come into play quite often, at least in terms of the discussion, um, to let them know that this is one benefit that they can take advantage of.

Um we do, while it's not heavily utilized, we do value this program greatly.

Um, and it obviously creates jobs, uh, it helps retain jobs.

You'll hear about the user today, um, they're adding jobs because they're implementing additional manufacturing and the FTZ, so it leads to economic growth and investment.

There's the environmental and economic efficiency, so processed goods who that are closer to the market, reduce transportation costs as well as emissions, government oversight and public interest.

Again, all of these activities are subject to public interest review and they remain under the jurisdiction of local, state, and federal authorities.

Um I will turn it back over to Chris to cover the roles and the application process briefly, and then we'll talk about the current applicant.

So just a quick look at the the players in this process.

Um Jay had already mentioned the foreign trade zones board.

Um they are the overseeing granting authority, they also facilitate the required congressional reporting on an annual basis based on FTZ activity.

Our partners in the U.S.

Customs and Border Protection Office.

Um we have a very strong partnership with our assistant port director and his inspectors, um, and they are involved in our review process to ensure that any red flags, any questions that they might have up front are already addressed and discussed with CBP at the table before we even submit an application so that we can more strongly uh ensure the success of our our business businesses in applying for this program.

Um most important one, I think, at least for us, is the zone grantee.

So City of Mesa is the grantee of Foreign Trade Zone 221, and that's administered from our Office of Economic Development.

So it is our responsibility to help facilitate a smooth application process and all of the partners in this um in this at every stage of the process, um, ensuring local treatment to all of our applicants and users, um, and again that coordination with CBP.

And then we have the zone operators or users, those are our our private businesses that are applying to be in the program that are responsible uh responsible for their daily FTZ operations, um, making sure that they are compliant with CBP regulations, inventory control, security, and all of the components of that federal requirement.

There are some other players that um operators and users may utilize.

Um, will have an FTZ consultant to help them, especially in the research and inquiry stages up front to make sure that they will be able to realistically realize the benefits of an FTZ program up front so that they understand what they are getting into because this is an ongoing process.

It's not that they apply and then they're good to go, they can operate as normal.

It's a day-to-day and week-to-week um requirement with additional resources and costs required.

So, as you can see, there are a lot of steps in this process.

I'm not gonna go through every single one, but you're not.

But as Jeff, no, I I got your signal earlier, Vice Mayor.

Um this is a lengthy and arduous process, and there are upfront costs that a business has to work with.

Um, and they have to have ongoing resources to manage this.

Um, it's not managed by CBP, it's not managed by other players.

They have to have trained staff to make sure that they are compliant in every step of their operations.

So it's a lot that they have to go through.

So it's it's not for everybody.

Some will utilize a third party to manage that day-to-day operation and reporting from uh because they don't want the the responsibility on a day-to-day basis, or it may be more cost-effective for them based on their operation.

You said this has an enormous amount of exporting happening, right?

Like that's one of the qualifiers.

It's typically for high volume.

Yeah, it's not like I make stickers and wrapping them out to China or something.

All right.

So I have a pause here.

If there are any questions on the program itself, and then we just have a couple quick slides on our applicant that's on Monday's agenda.

Any questions on the FTZ overview, mayor?

No, I'm good.

Thanks.

Excellent.

All right.

Okay.

So our latest applicant.

Yes.

We're racking them up, stacking them up.

MGC Pure, yes.

Well, and that's that's indicative of what's happening in the economy and the instability of tariffs right now is increasing inquiries into this program.

So we're anticipating that's going to continue for a while.

Um, MGC is one of those.

They've been working on their application for a while.

They were recently um approved by the FTZ board.

Um, they were actually a pretty easy and smooth applicant.

The they have current square footage at their existing buildings for a 26-acre site east of Signal Butte on Pecos.

They have 66 just over 66,000 square feet now, with over 57,000 in future planned buildings on this site.

So they are expecting to expand and grow as they utilize the benefits of this program.

So they've been in Mesa since 1995.

So they've been here a very long time.

And they're hoping that being able to utilize this program as they're continuing to grow, is going to help facilitate that with their reduced costs and their streamlined operations.

So our Mesa location serves as the headquarters and primary manufacturing plant for their company's North American operations, which is a huge story for our program.

They're a subsidiary subsidiary of Japan-based Mitsubishi Gas Chemical Company, but again, this is their North American headquarters.

So and they're conducting various activities, but primarily it is part of that semiconductor supply chain.

They are manufacturing ultra pure chemicals that are critical to the semiconductor industry with uh facilities in Oregon, Texas, and their headquarters here in in Arizona.

So this will hopefully allow them to mitigate tariffs while they grow.

Um they will be submitting that second step uh based on their operation for production notification through customs and border protection.

And this is just a quick map of the site that they submitted with their application, and you can see the existing building sites that they're hoping to get up under the FTZ designation and activated soon with that additional area for growth and the additional 50,000 uh 57,000 square feet.

Gee, is this at the end of the um pirate rail line?

Are they connecting to that?

Vice Mayor, yes, it is.

So they're they're really expanding and supporting the the growth of the microchip.

It's my understanding.

My son's in this business a bit, and he says it's it's the chemicals that if we're gonna make advances in making smaller and smaller and faster, more efficient uh chips that it's the purity of the chemicals that really is worth the base of this.

Vice Mayor, yeah, we're we're excited about this.

This is um the mayor had the opportunity to meet with the CEO um of Mitsubishi uh directly in Tokyo last year, and this was one of the things that was important for their continued expansion um here.

I mean, as as was alluded to, they've been in Mesa for decades and have kind of kept quiet and stayed over uh in the middle of nowhere at the time of Southeast Mesa, which is not uh the case anymore.

And and the fact that they're choosing to expand and invest and right as that's timed with TSMC and Intel and the whole semiconductor supply chain uh is a great testament to uh these foreign direct investment and international major um conglomerates like Ms.

Mitsubishi investing in Mesa.

So this is a great story to tell, and appreciate Jay and and Chris and their whole team because this is something that their CEO talked directly about the importance of.

They may have mentioned it uh and and forgive me if you did.

How many employees now and how many employees do they anticipate after this?

Vice Mayor Councilmember Adams.

I think they have 150, but they're they're going to be adding a hundred with this expansion.

Great.

I mean, that that's the kind of those are the kind of jobs that we've chased for years.

Yeah, high wage, high quality jobs, absolutely tech sector.

The only problem I see with this is it's in D6.

I mean what about Falcon?

We have a hit list now that we'll be going after.

Marshall Marsha Marsha.

Anything else from the gallery on this item, Mayor?

No, sir.

Okay.

Outstanding.

Thank you.

Thank you so much for the work and um hopefully we see more.

I understand we're gonna see some more of these applications come in, and we appreciate you.

I love it.

Uh she said a couple.

A couple right now.

She keeps it secret, she's sure.

Yeah.

All right.

Thank you.

If nothing else, item number three is to acknowledge receipt of minutes of various boards and committees.

Do I have approved?

I have a motion by Councilmember Duff, a second by Councilmember Taylor.

All in favor say aye.

Aye.

Aye.

Any opposed?

Carries unanimously.

Item number four, currents events summary, uh, meetings and conferences attended.

Anyone like to anyone?

Anyone?

Sure.

Yes, ma'am.

Well, we have a new edition in downtown Blue Corn Cafes at 19 West Main Street.

That's just on the other side of Nanthaborn.

Uh that had their grand opening um celebration.

I think it was on Tuesday.

They have um wonderful sourdough, all kinds of muffins and desserts and cupcakes and um many, many things that you will load up a bag and take it home.

Um and they blue corn cafe.

They actually have a couple of locations over in Glendale, and uh so they're opening a location here.

And they're actually going to maybe in the fall do a jazz brunch.

Uh Chris, the owner is very much into music and a jazz player who's themselves.

They have coffee, are they a coffee?

Yeah, yeah, they have all kinds of coffees.

Lemonade and uh Italian sodas and iced tea and all kinds of stuff.

And sandwiches, they have some sandwiches, breakfast sandwiches and I'm gonna have to go back and look at my and see if I said banking by mistake.

You know, senior moment or something.

Yeah, so they're for get started, they're doing 10 to two um every day except Monday, they're closed.

And they might be adjusting those hours as they figure out you know what the best time is to be uh open to capture, I mean no, they're had conversations about there's a lot of employees that start early.

I'm like, yeah.

So you know, uh, it may adjust.

Right.

And um yesterday I went to the main library for summer reading kickoff, and we had dinosaurs galore and little hound things and all kinds of art to kick off the reading program.

I handed out some little vouchers to increase their points.

It was lots of fun, a good turnout.

Um last night I went to the Arizona Museum for Natural History for their Arizona through Time speaker series.

So about once a month, I bring in um I don't know, very smart people.

Um last night the um talk was about Arizona, like 245 million years ago, and looking at the reptiles and um amphibians and mammals that existed at that time based on archaeological um findings, you know, fossils throughout our state where they were found and anticipating maybe what they look like uh through AI based on the information they had.

It was fast-paced.

He covered a lot.

He did 245, dipped down to 235 million years ago, and that that's all the time we had to.

It's a really great series.

There's another one, I think, on July 17th.

Don't quote me on that date, but another one coming up in July.

Um, so and that's part of the um after hours program at the Natural History Museum.

After dark series, after dark series.

And it is June, so happy Pride Month.

There's celebrations from a number of organizations and people and events.

So I just wanted to recognize our um respect and and excitement for um celebrating all um uh of our people and be inclusive in our city.

Thank you.

Mr.

Adams, anything?

No, sir.

To my right?

Yes, uh Jen.

I I too um uh uh attended the summer reading kickoff in May in Mesa at the Red Mountain Branch Library, and it was a lot of fun.

It was a great turnout.

They did dinosaurs, yes.

Those were a hit.

The dinosaur puppets, lots of I know I did ask one little girl about did she love to read and she did inform me she does not read yet.

So I I'm I guess beyond my kids.

I should have recognized how old she was and that she wasn't reading.

So that was a little bit of a faux pas, but all the kids had a good time, so thank you.

Captain Member Taylor.

Thanks.

Uh I just wanted to share with the public.

I toured the Mesa Arts Center and I had not been to the studios yet.

And so if you are looking for an amazing opportunity to take an art course in glass blowing, which was pretty incredible, ceramics, um, painting, illustration.

I just was so impressed by the various artists that had their work on display in the studio section.

Um we toured the theaters, of course, and I've I've been to the Aikita Theater, which is just like mind-blowing acoustics.

I can't wait for boss gags to come.

I'm really excited.

Um, but yeah, I didn't know that we had such incredible classes available at the studios, and so to take some time and walk through them and find out, you know, when they're available.

Uh the summer sessions, I know for some of them are already full.

They fill up really quickly.

They started on June 8th and June 9th, but keep your eyes on the Mesa Arts Center Studios site.

They will let you know as soon as the next sessions are available.

And if you're interested, book quickly, because apparently it books out within like an hour.

So I was just excited to see that.

I think it's a great way for people to come in and have an opportunity to improve their skills.

And they said they even have one woman who drives once a week from Flagstaff to take her courses there because we are the only center in all of Arizona that offers this type of coursework.

So I just thought that was pretty impressive that it's right here in the downtown Mesa area.

Okay, thanks.

That's all.

I'll just add one.

I'm gonna give a shout out to Sally Harrison at the uh Mesa Chamber, and the Mesa Chambers Board of Directors as a uh board building event.

They went to the uh we went to the United Food Bank and packaged 1,870 emergency uh food bags, which helps about that many families.

So if anybody wants to do it, they the United Food Bank has it down.

You walk in, you grab a bag, and you just walk this circle, filling the bags with goods, and then you hand it off to someone who puts it in the crate, they do uh a timer, and when you fill fill the whole crate, I think it's 80 bags per crate, they ring a bell, and uh you will get your steps in.

Have you done it?

Sally Lap you uh usually does.

She usually does, yeah.

I keep getting in the wrong of the slower lines, but Sally, yeah, Sally Lapp me a couple of times.

That was it was great.

Last time I did that, she lapped the group three times.

She she is enthusiastic.

All right.

Mr.

Butler, I think we have one more meeting.

I yes, mayor uh Vice Mayor Council, um Councilmember Goforth compared it to uh, you know, we're like kids on the last week of school, just ready to get to summer break.

So uh one more hard exam.

No, uh Monday uh we'll welcome you back, three o'clock first for the economic development committee for those of you who participate in that.

That's a 3 p.m.

start on Monday, and then followed by study session at 5 15.

And our last council meeting before the summer break will follow immediately after that.

So um, mayor just uh uh Vice Mayor, just to a couple of things to highlight again.

I know I mentioned these before, but this weekend uh skate party at the plaza.

Bring your own roller skates, but there'll be food trucks, uh, the movie screen will be going.

So come and enjoy a nice evening here at the plaza.

And then the Falconfield um cockpit close-up is Saturday morning from 8 a.m.

I will be those if you want to come.

Okay.

Councilmember GoForth will be there.

That that's another part uh great addition to the airplane.

So come and uh and spend some time there on Saturday morning.

So thank you very much.

Very good.

And uh I know that we already have a motion to adjourn by Councilmember Taylor and a second by Councilmember Go Forth.

Mayor, do you have anything to add before we uh make our final vote to walk out?

Amen.

I just want to add check the Mesa Parks and Recreation homepage.

There's all kinds beyond the skate party, there's other activities throughout the city and check them out.

There's a lot going on.

They're starting Saturdays, so don't miss it.

Very good.

All in favor of adjourning, say aye.

Aye.

Hearing no no's, we are adjourned.