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New Market Tax Credits_Kutak Rock LLPTHE CITY OF DUBUQUE Masterpiece on the Mississippi Dubuque All-American City 2007 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: New Market Tax Credits DATE: November 25, 2008 In conjunction with the City's contract with B & G Development, LLC to assist the City in efforts to obtain New Market Tax Credit funding for City projects, Economic Development Director Dave Heiar is recommending execution of a contract with Kutak Rock, LLP for legal advice associated with securing New Market Tax Credits. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager David J. Heiar, Economic Development Director THE CITY OF DUBUQUE Masterpiece on the Mississippi Dubuque All-American City 2007 November 21, 2008 TO: Michael C. Van Milligen, City Manager FROM: David J. Heiar, Economic Development Director RE: New Market Tax Credits INTRODUCTION The City Council has authorized City Staff and consultants to pursue New Market Tax Credits (NMTC) for various local development projects. The use of NMTC funding is very complicated and will require the City to assemble a team of specialists to help guide this process. BACKGROUND In September, the Council approved a contract with B & G Development, LLC (Gronen/Butler) to assist the City in our efforts to obtain NMTC funding for City projects. Since that time, Gronen and Butler have attended a national conference for Certified Development Entities (CDE) that have received NMTC allocations. Based on their efforts, two CDE's have been to Dubuque to witness some of our re-development efforts in the Port of Dubuque, Downtown and Warehouse Districts. Both CDE's have expressed a strong interest in working with the City to help fill some of the financing gaps. As we move closer to putting together financing packages, we will need to add other consultants to our team to assure that we are meeting all the federal regulations that are part of the NMTC process. It is also important that we include team members who are very familiar with and have a good working knowledge of the NMTC process. At this time we need the assistance of a legal firm that specializes in NMTC. Gronen and Butler have recommended Kutak Rock, LLP of Kansas City, based on their national reputation. Bill Noth, Dubuque's bond counsel, has worked with Kutak Rock, LLP on NMTC deals in other Iowa cities. He has had very favorable experiences with this firm. At this time we are not sure how much legal consultation will be required. Therefore, at least until we can be more specific about our projects, Kutak Rock, LLP is proposing an hourly fee on an as needed basis (see attached agreement and resumes). RECOMMENDATION/ACTION STEP That the City Council approve a contract with Kutak Rock, LLP for legal advice associated with securing New Market Tax Credits on an as needed basis. F:\USERS\DHeiar\NMTC\Kutak Rock Council Memo.doc KUTAK ROCK LLP ATLANTA CHICAGO SUITE 500 DENVER 1010 GRAND BOULEVARD DE9 MOIN EB FAY ETT EYILLE KANSAS CITY, MISSOURI 84108-2220 IRVINE 816-960-OOSO LITTLE ROCK L03 ANO ELE9 FACSIMILE 816-980-0041 OKLAHOMA CITY www.kutakrock.com OMAHA RICHMOND SCOTTSDALE Q October 22, 2000 WICHITA TON Mr. David Heiaz City of Dubuque, Iowa 50 West 13~' Street Dubuque, IA 52001 Re: Engagement Letter re: Representation of City of Dubuque, Iowa (the "City") in planning, structuring and implementing a new markets tax credit ("NMTC") transaction relating to a community stadium (the "Transaction") Dear Mr. Heiar: At the beginning of any engagement with a client, it is our practice to prepare a letter setting forth the terms of our engagement, including our fees and expenses. Attached to this letter are the terms and conditions of representation. Until a CDE issues a commitment letter to provide new market tax credit allocation authority with respect to the Transaction, you agree to pay our accrued fees and expenses on a monthly basis within 30 days of your receipt of an invoice. Thereafter, we will not submit monthly invoices but our accrued fees and expenses shall be due and payable at the closing of the Transaction, although we reserve the right bill you for our fees and expenses incurred to date if the Transaction has not successfully closed before August 1, 2009. We have listed our hourly rates for work on the Transaction on the fee and expenses Schedule attached hereto. Please acknowledge the terms of our representation by executing the signature block below. We appreciate the opportunity to be of service to you. Very truly yours, Paul . O' o 4829-3163-3154.2 KUTAK ROCK LLP Accepted and agreed to this day of October, 2008. CITY OF DUBUQUE, IOWA By: _ Name: Title: 4829-3163-3154.2 KUTAK ROCK LLP KUTAK ROCK LLP TERMS OF REPRESENTATION Kutak Rock LLP is pleased to have this opportunity to serve you. Our goal is to provide you quality legal services on a prompt, effrcient basis. We believe that our relationship will be stronger and more effective when there is a clear understanding of the services we will perform, the fees we intend to charge for such services and the payment thereof. Therefore, it is our standard procedure to be specific with our clients as to the scope of the services that we intend to provide and the terms by which we will bill fees and expenses. The letter accompanying these Terms of Representation sets forth that information. If what is set forth in the accompanying letter or in these Terms of Representation does not accurately describe your understanding of the services we are to perform or the terms for billing fees and expenses, please advise the attorney sending you the letter. Unless the attorney sending the engagement letter to you is notifred promptly, we will assume that these Terms of Representation and the accompanying letter are acceptable to you. Scope of Representation. The scope of our representation will be limited to providing only those services that are described in the accompanying letter. Unless otherwise noted, we will render those legal services that are necessary to the representation. No other services are intended to be provided without the mutual agreement of you, as our client, and Kutak Rock LLP. Later, if you determine to change materially the scope of our representation, we will need to document that in additional correspondence. Fees and Hourly Rates. Our fees are based primarily on the time spent by each attorney and paralegal in the firm who work on your matter. The hourly rate of each attorney and paralegal is based on that individual's expertise and experience. We reserve the right to adjust our fee rates on an annual basis, and bills for our fees will reflect those adjustments. We normally record time in six-minute intervals for work done on your matter, including required travel time. Expenses. Our charges for expenses that we incur on this transaction are included in the fee quote included with the enclosed letter. We will bill you for expenses we incur on your behalf. We will ask you to pay directly any significant outside expenses incurred on your behalf and will direct statements for such expenses to you for payment. All expenses will be itemized on the statements we will send you. Schedule. Attached is a current Schedule of our fees and expense charges. Attorney-Client Privilege. Our statements may contain information protected by the attorney-client privilege. As the privilege could be deemed waived if someone other than the client sees the privileged material, we recommend that you keep our statements, as well as other letters and communications from us, in a separate file marked "Attorney-Client Privileged Materials" and keep the file in a secure place. Your communications with us are legally protected by the attorney-client privilege. In addition, we will treat your matter as confidential, and we will not (unless you specifically grant us the authority to do so) discuss or otherwise 4819-3163-3154.2 KUTAK ROCK LLP make available to anyone, including other clients, any information about you, your business or our work on your behalf. Termination of Services and Representation. You may terminate our services at any time. Termination of our representation does not, however, relieve you from the responsibility of paying those fees and expenses incurred through the date we are notified of such termination. Similarly, we may withdraw from this representation for reasons including your failure to timely pay our statements; failure to disclose all facts material to our representation; failure to act in accordance with our advice; or development of one or more circumstances which, in our judgment, impair our ability to maintain an effective attorney-client relationship. Completion of Matter. After a particular matter is completed, we do not (unless you specifically request in writing that we do so) undertake to continue to review that matter and update you concerning legal developments, such as changes in applicable laws or regulations. If you do ask us to review a specific matter on which we have previously worked, we will consider that to be a new representation. Thus, while we may, from time to time, call to your attention issues or legal developments that might be relevant to your operations, we are not undertaking to do so as a part of this representation. Unless otherwise terminated, our representation will end upon our sending you our final statement for services rendered with respect to this matter. Document Retention. If, upon termination or completion of a matter, you wish to have your documents in our possession delivered to you, please advise us. Otherwise, all such documents will be stored for a reasonable amount of time and will thereafter be destroyed in accordance with our established policy. No Guarantee. We will perform our professional services on your behalf to the best of our ability, but we cannot make and have not made any guarantees regarding the outcome of our work on your matters. Any expressions by us about the outcome of your matters are our best professional views only and are limited by our factual knowledge at the time they are expressed. We hope this explanation is helpful to you, and we invite you to discuss any concern with us at any time or to enquire at any time about the fees or costs incurred. It is extremely important that we proceed so that you and we have a clear and satisfactory understanding about the work to be performed. We will strive to keep you fully informed during the course of this engagement and anticipate that you, likewise, will keep us informed of pertinent developments. We trust that you will find that we are not only available and responsive but that we will work diligently to meet your needs and deadlines. 4829-3163-3154.2 KUTAK ROCK LLP SCHEDULE DESIGNATED HOURLY RATES Paul O'Hanlon Daniel J. Skomal Jeff Arnold Kathy Giancana HOURLY RATES Other Partners Other Associates Pazalegals DISBURSEMENTS Facsimiles Outgoing -local Outgoing long-distance Reproduction Costs Computer research Long distance Overtime Postage Other expenses such as messenger, filing fees, publication fees, travel, etc. $350 $325 $275 $350 $175 to $400 $110 to $225 $40 to $85 $.50 per page $1.00 per page $.10 per page Direct cost Direct cost Direct cost Direct cost Direct cost 4829-3163-3154.2 KuTnK Rocx LLP New Markets Tax Credits Practice August 2008 4836-8470-6562.1 KUTAK ROCK LLP L NEW MARKETS TAX CREDIT PRACTICE With one of the most active new markets tax credit (NMTC) practices in the country, Kutak Rock LLP is a recognized industry leader in this area of law. NMTCs are a financial incentive created to assist in attracting capital investments to distressed census tracts. As provided by legislation, the Community Development Financial Institution Fund (CDFI Fund), a branch of the United States Treasury Department, makes available a block of credits for community development projects. Entities that receive certification as qualified community development entities (CDEs) apply for the credits in a competitive process. NMTCs attract investors to community development projects by providing tax credits to investors over aseven-year period following initial investment. Kutak Rock LLP has developed a substantial NMTC practice through its representation of investors, leverage fund lenders, CDEs and qualified active low-income community businesses (QALICBs). In addition to our client representation, lawyers at Kutak Rock LLP actively participate in industry efforts to resolve tax and structuring issues in the NMTC area, including through submitting formal comments to the CDFI Fund and the Treasury Department and through industry efforts to promote uniformity among practitioners. The firm regularly represents one of the most active leveraged fund lenders and structuring agents in the NMTC industry on its NMTC transactions. In our role as its counsel, the firm is responsible for preparing all of the major documentation for each transaction, including the leveraged fund operating agreement, the CDE operating agreement, the leveraged fund loan agreements, the QLICI loan agreements, the loan servicing and origination agreements, the fee agreements and various related documents. The firm also delivers the major tax opinions to the leveraged fund lender and the tax credit equity investor in these transactions. The firm represents some of the major equity investors throughout the country with respect to structuring the qualified equity investments (QEIs) into CDEs. In this regard, the firm has participated in both leveraged, non-leveraged transactions and transactions combining the NMTC with historic rehabilitation tax credits. In the scope of such representation, the attorneys in the firm have been actively involved in structuring and negotiating the leverage fund and CDE operating agreements, servicing and management agreements, guarantees and related ancillary documentation as well as the review of the necessary due diligence. The firm has delivered the customary tax opinions with respect to the availability of the NMTCs and significant tax issues to the Investor. 4836-8470-6562.1 In addition, the firm represents equity investors with respect to qualified equity investments (QEIs) into CDEs, CDEs that have received NMTC allocation who are receiving QEIs from investors and QALICBs with respect to qualified low income community investments from CDEs. The firm has also represented CDEs in connection with applications for allocations of NMTCs as well as applications for CDE status. Finally, the firm has representing QALICBs that are receiving QLICIs from CDEs. Through its participation in a broad range of NMTC transactions having varied structures, Kutak Rock has obtained a broad range of experience on a variety of structures and the often complicated tax and business issues associated with NMTC transactions. Kutak Rock has developed innovative structures for its clients in NMTC transactions, including structures which provide the benefits of using tax-exempt financing in connection with realizing NMTCs, as well as revolving loan structures within the framework of NMTC transactions. The resumes of Kutak Rock LLP's principal partners and associates who would provide any requested services are attached hereto as Attachment A. We believe that the attorneys listed in Attachment A possess the necessary technical skills and experience level with respect to the new markets tax credit program and complimentary areas such that Kutak Rock LLP can achieve the objective of efficiently and effectively completing proposed engagements at a competitive cost. 4836-8470-6562.1 in both structured and project finance transactions. Mr. Arnold is admitted to practice in Missouri and Texas. Kathleen Giancana represents businesses and individuals in a broad range of complex federal, state, local and foreign tax matters. Her specific areas of expertise include new markets tax credit transactions, the structuring and operation of partnerships, limited liability companies and other joint ventures, international taxation, mergers and acquisitions, corporate formations, the preservation of net operating loss carryovers, leveraged leasing, financial products, tax shelters and Arizona taxes. Ms. Giancana also provides estate planning for high-net-worth individuals, including the implementation of sophisticated wealth transfer strategies designed to minimize gift, estate, generation-skipping and income taxes. Ms. Giancana has an active tax controversy practice, which includes litigating in tax courts, representing taxpayers in connection with federal and state tax audits and obtaining private letter rulings from the Internal Revenue Service and state and local taxing authorities. Ms. Giancana spent the first 17 years of her career practicing on Wall Street. She is admitted to practice in Arizona and New York. 4836-8470-6562.1