Second Amendment to the Dubuque Racing Association LeaseCity of Dubuque
City Council
Copyrighted
February 17, 2025
ITEMS SET FOR PUBLIC HEARING # 3.
ITEM TITLE: Second Amendment to the Dubuque Racing Association
Lease
SUMMARY: City Attorney recommending City Council schedule a public
hearing for March 3, 2025 on the second amendment to the
Dubuque Racing Association lease and the consent to the
amended leasehold mortgage.
RESOLUTION Intent To Dispose Of An Interest In Real
Property Through A Second Amendment To The Amended
And Restated Lease Agreement With The Dubuque Racing
Association, Ltd.
SUGGUESTED Receive and File; Adopt Resolution(s), Set Public Hearing for
DISPOSITION: March 3, 2025
ATTACHMENTS:
1. Staff Memo
2. Resolution
3. Notice of Public Hearing
4. Second Amendment to 2023 Lease
Page 343 of 797
THE CITY OF
DUB E
Masterpiece on the Mississippi
CRENNA M. BRUMWELL, ESQ.
CITY ATTORNEY
TO: MAYOR BRAD M. CAVANAGH & MEMBERS OF THE CITY COUNCIL
DATE: FEBRUARY 13, 2025
Dubuque
All•IVeHea Clq
1n1to /
I I
2007-2012.2013
2017*2019
RE: SECOND AMENDMENT TO THE DUBUQUE RACING ASSOCIATION LEASE
The City of Dubuque in conjunction with the Dubuque Racing Association (DRA) and
community participants have worked diligently for years to procure a Chaplain Schmitt
Island Master Plan and Schmitt Island Placemaking & Implementation Plan.
The Chaplain Schmitt Island Master Plan was adopted in 2014 and amended in 2017.
The Chaplain Schmitt Island Placemaking & Implementation Plan was adopted in 2017.
The goals of the plan were largely recreational focused and included connecting and
expanding access to the riverfront, creation of educational opportunities on the island,
highlighting the unique characteristics of the island, bringing new visitors to the island,
and offering activities and events for all seasons.
Work on implementation of the plans has been ongoing. The biggest project to date has
been the Veteran's Memorial. A Community Project Funding grant was received via
Representative Hinson for construction of the Veterans Memorial Trailhead Project and
will be constructed in 2024. In 2022 the City invested millions of dollars in improvements
to ImOn Arena. Additional improvements to the arena are currently in process.
The largest tenant on the island is the DRA leasing and operating Q Casino. The DRA is
in progress with approximately $90 million dollars in public and private improvements to
the island. The improvements completed or proposed include:
Public Improvements
• Iowa Amphitheater on Chaplain Schmitt Island
Veterans Memorial Trailhead Project
Proposed $40 million Chaplain Schmitt Island connectivity and access
improvements including a railroad overpass at 14th Street
OFFICE OF THE CITY ATTORNEY DUBUQUE, IOWA
SUITE 330, HARBOR VIEW PLACE, 300 MAIN STREET DUBUQUE, IA 52001-6944
TELEPHONE (563) 589-4381 / FAx (563) 583-1040 / EMAIL cbrumwel@cityofdubuque.org
Page 344 of 797
Private Improvements
• Construction of a new 8-story, 108 room Hilton Tapestry Collection hotel
adjacent to the existing Hilton Garden Inn, including an upscale rooftop
restaurant, lounge, and event space overlooking the Mississippi River
• Interior casino remodel, including elevated bar with bar top slot machines and
updated showroom, new Sports Book, and new sports bar.
• New banquet space and party rooms
• Additional of a family entertainment zone for all ages with high -end arcade
games
• Exterior casino upgrades including the fagade, signage, landscaping, and
surface parking
• Pinseekers, a hybrid golf entertainment facility
The private improvements to the island necessitate:
• Further amendment to the lease between the City and DRA.
A second amendment to the lease has been negotiated between the City and DRA for
Lot 1 of Chaplain Schmitt Island which contains the area where the casino, existing hotel
and restaurant, and the new hotel are located.
The amendment
• Adjusts the requirements of the Debt Payment Reserve Fund
• Includes a mechanism for refinancing of the Hilton Garden Inn in the event
the Debt Payment Reserve Fund dips belong an agreed upon level
• Takes into account the Development Agreement with the DRA and the
rebate payments the DRA will receive pursuant to the Development
Agreement
• Allows the payment to the Endowment Fund be used temporarily to pay off
the loan the DRA has on the Veterans' Memorial for fiscal years 2024-2028
or until the loan is paid in full
Public hearing on the amendment to the lease and the consent to the amended leasehold
mortgage is to be scheduled for March 3, 2025. Staff respectfully recommends approval.
cc: Michael C. Van Milligen, City Manager
2
Page 345 of 797
Prepared by Crenna Brumwell 300 Main Street Suite 330 Dubuque IA 52001 563 583-4113
RESOLUTION NO. 57 - 25
INTENT TO DISPOSE OF AN INTEREST IN REAL PROPERTY THROUGH A SECOND
AMENDMENT TO THE AMENDED AND RESTATED LEASE AGREEMENT WITH THE
DUBUQUE RACING ASSOCIATION, LTD.
WHEREAS, the City of Dubuque, Iowa (City) is the owner of the real property legally
described as
Lot 1 of Chaplain Schmitt Island in the City of Dubuque, Iowa, according to
the Plat recorded as Instrument #2023-7679, records of Dubuque County,
Iowa
(the Property); and
WHEREAS, the Property is subject to an Amended and Restated Lease Agreement
(Lease) between City and the Dubuque Racing Association (Association) dated September
19, 2023; and
WHEREAS, City and Association entered into a First Amendment to the Lease
dated April 15, 2024; and
WHEREAS, City and Association now desire to further amend the Lease
Agreement; and
WHEREAS, the DRA is in progress with a construction project of more than $90
million; and
WHEREAS, the City Council believes it is in the best interests of the City to
approve the Second Amendment to its Lease Agreement with the DRA.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
DUBUQUE, IOWA:
Section 1. The City Council intends to dispose of City's interest in the foregoing -
described real property pursuant to:
• The Second Amendment to its Lease Agreement with the DRA, and
Section 2. The City Clerk is hereby authorized and directed to cause this Resolution
and a Notice to be published as prescribed by Iowa Code §364.7 of a public hearing on
City's intent to dispose of the foregoing -described real property, to be held on the 3 d day of
March 2025, at 6:30 o'clock p.m. in the City Council Chambers at the Historic Federal
Building, 350 W. 6ch Street, Dubuque, Iowa
Passed, approved and adopted this 17th day of February, 2025.
ra gh, Mayor
Attest:
Adrienne Breitfelder, City Clerk
CITY OF DUBUQUE, IOWA
OFFICIAL NOTICE
PUBLIC NOTICE is hereby given that the City Council of the City of Dubuque, Iowa, will
hold a public hearing on the V day of March 2025, at 6:30 p.m. in the Historic Federal
Building, 350 West Sixth Street, 2nd floor, Dubuque, Iowa, at which meeting the City
Council proposes to dispose of an interest in real property to the Dubuque Racing
Association Ltd. through a Second Amendment to the Lease Agreement between the City
and the Dubuque Racing Association Ltd..
The real property encumbered by the Lease Agreement is:
Lot 1 of Chaplain Schmitt Island in the City of Dubuque, Iowa, according to
the Plat recorded as Instrument #2023-7679, records of Dubuque County,
Iowa.
At the meeting, the City Council will receive oral and written comments from any resident
or property owner of said City to the above action. The official agenda will be posted the
Friday before the meeting and will contain public input options.
The City Council agenda can be accessed at:
https://citVofdubugue.novusagenda.com/AgendaPublic/ or by contacting the City Clerk's
Office at 563-589-4100, ctyclerk(a)-cityofdubug ue.org.
Written comments regarding the above public hearings may be submitted to the City
Clerk's Office, before said time of public hearing: via email at ctyclerk(a_cityofdubug ue.org
or by mail to City Clerk's Office, City Hall, 50 W. 13t" St., Dubuque, IA 52001.
At said time and place of public hearings the City Council will receive any written
comments.
Copies of supporting documents for the public hearings are on file in the City Clerk's
Office and may be viewed Monday through Friday between 8:00 a.m. and 5:00 p.m.
Individuals with limited English proficiency, vision, hearing, speech, or other impairments
requiring special assistance should contact the City Clerk's Office at (563) 589-4100,
ctyclerk cityofdubugue.org as soon as feasible.
Deaf or hard -of -hearing individuals can use Relay Iowa by dialing 711 or (800) 735-2942.
Published by order of the City Council given on the day of February 2025.
Adrienne Breitfelder, City Clerk
Page 348 of 797
SECOND AMENDMENT TO
THE AMENDED AND RESTATED
LEASE AGREEMENT
BETWEEN
THE CITY OF DUBUQUE, IOWA
AND
THE DUBUQUE RACING ASSOCIATION, LTD.
This Second Amendment to Amended and Restated Lease Agreement (this
"Amendment") is dated for reference purposes as of the 6th day of March, 2025, and is by
and between the City of Dubuque, Iowa, a municipal corporation ("City"), and Dubuque
Racing Association, Ltd., an Iowa nonprofit corporation ("Association").
WHEREAS, City and Association are parties to an Amended and Restated Lease
Agreement dated for reference purposes the 19th day of September 2023, as amended
by the First Amendment to the Amended and Restated Lease Agreement for reference
purposes dated the 15th day of April 2024 (as so amended, the "Lease").
WHEREAS, City and Association now desire to further amend the Lease as set
forth herein.
NOW, THEREFORE, City and Association, in consideration of the mutual
covenants and conditions hereinafter set forth, agree as follows effective as of
December 1, 2024:
1) Definitions. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Lease.
2) Amendment to Paragraph 4 of the Lease. Paragraph 4 of the Lease is
amended to read as follows:
4. Fund Reauirements.
(a) City and Association acknowledge and agree that the monies on
deposit in the depreciation and improvement fund previously
established by Association pursuant to the terms of the Casino Lease
(the "Depreciation and Improvement Fund") are the sole property of
Association. The balance of the Depreciation and Improvement Fund
shall be used by Association to (i) pay for costs and expenses related
to the removal of any structures (including any necessary
environmental remediation), equipment, furniture, furnishings, and
other personal property of Iowa Greyhound Association and/or its
vendors, suppliers and contract partners remaining on the Leased
Premises and/or the land adjacent thereto, (ii) pay for any costs and
expenses incurred by Association in connection with preparing and
Page 349 of 797
readying such areas for Association's operations, and/or (iii) make or
fund the Equity Contribution (as defined in paragraph 12 hereof). Any
interest accruing on the balance in the Depreciation and Improvement
Fund shall be deposited to the Depreciation and Improvement Fund
and shall be available to and expended by Association as provided in
this subparagraph (a).
(b) Association shall establish a Debt Payment Reserve Fund (the "Debt
Payment Reserve Fund") to be held in a restricted fund with
Association, into which it shall deposit funds annually through Fiscal
Year 2028 or on a schedule approved by the City until such time as
the balance on deposit therein equals the lesser of (i) the aggregate
amount of principal and interest payments to be made by Association,
on an annual basis, to its institutional lender(s) or (ii) $7,000,000.00
(the applicable dollar amount pursuant to subsection (i) or (ii) is
referred to herein as the "Required Amount").
Once the Debt Payment Reserve Fund reaches the Required
Amount, and so long as the monies on deposit in the Debt Reserve
Fund equal or exceed the Required Amount, the annual contribution
requirement will cease; provided, however, if Association accesses
the Debt Payment Reserve Fund to cover a debt payment or to ensure
the annual Charitable Distribution Amount meets a minimum of
$1,000,000 for distribution and the monies on deposit in the Debt
Payment Reserve Fund fall below the Required Amount as a result
thereof, then Association's obligation to contribute funds to the Debt
Payment Reserve Fund shall recommence until such time as the
monies on deposit in the Debt Payment Reserve Fund once again
equals or exceeds the Required Amount.
The monies on deposit in the Debt Payment Reserve Fund, together
with all accrued interest thereon, are the sole property of Association;
however, Association shall not use, pledge or otherwise encumber the
Debt Payment Reserve Fund or the funds on deposit therein without
the prior written consent of City. In the event Association must access
the Debt Payment Reserve Fund to cover a debt payment or to ensure
the annual Charitable Distribution Amount meets a minimum of
$1,000,000 for distribution, Association shall, in writing, provide to City
a written plan within sixty (60) days as to how Association will
replenish the fund with a specific timeline for replenishment
acceptable to City.
If the City's lease payment is ever subordinated to Association's
lender, Association will repay the City at its first opportunity prior to
replenishing the Debt Payment Reserve Fund. A written plan,
2
Page 350 of 797
submitted to and approved by City, to pay the subordinated lease
payment shall be submitted within sixty (60) days.
In the event Association has accessed the Debt Payment Reserve
Fund to cover a debt payment or to ensure the annual Charitable
Distribution Amount meets a minimum of $1,000,000 for distribution
and the balance of the Debt Payment Reserve Fund is reduced below
the Required Amount after Fiscal Year 2028, Association will be
obligated to refinance its loan on the Hilton Garden Inn to access
available equity; provided, however, that Association shall have no
obligation to refinance such loan to the extent that the refinance
thereof would trigger a prepayment penalty payable to Association's
institutional lender(s).
Association shall not enter any other covenants, loans, or
agreements that would further restrict access to this refinancing
possibility without the consent of the City which consent shall not be
unreasonably withheld.
3) Amendment to Paragraph 11 of the Lease. Paragraph 11 of the Lease is
amended to read as follows:
11. Taxes and Fees.
(a) Property Taxes. Association shall pay all property taxes, both real
and personal, before they shall become delinquent, and which may
be levied and assessed against the Leased Premises. City shall not
oppose any application filed by Association for exemption from the
payment of property taxes, both real and personal;
(b) In the event Association pays real estate taxes levied and assessed
against the portion of the Leased Premises described in paragraph
3(b) hereof, such real estate taxes paid are deductible from the next
rental payments due under paragraph 3(b) of this Lease;
(c) In the event Association (i) pays real estate taxes levied and
assessed against a portion of the Leased Premises and (ii) receives
a tax increment rebate payment in respect of such taxes pursuant to
a Development Agreement between Association and City,
Association may only deduct from its next rental payment following
receipt of a rebate payment pursuant to a Development Agreement
that portion of the real estate taxes paid by Association for which it
has not actually received a tax increment rebate payment pursuant
to a Development Agreement;
Upon the expiration of the Development Agreement for the
construction of Key Hotel and Association begins paying real estate
3
Page 351 of 797
taxes levied and assessed against the portion of the Leased
Premises containing the Key Hotel, such real estate taxes paid are
deductible from the next rental payments due under paragraph 3(b)
of this Lease
(d) In the event of non -appropriation pursuant to a non -appropriation
clause contained within a Development Agreement between the
Association and City, Association may deduct from its next rental
payment any taxes levied and assessed for which no rebate payment
is received.
(e) In no event may Association deduct from its rental payments real
estate taxes levied and assessed for improvements made or owned
by third parties without the consent of the City.
(f) Other Taxes and Fees. Association shall be responsible for and
agrees to pay all other taxes, rates, charges, levies, and
assessments, general and special, of every name, nature, and kind,
whether now known or hereafter created which may be taxed,
charged, assessed, levied or imposed, which become payable
during the term of the Lease and would become delinquent if not so
paid, arising from Association's operations at the Leased Premises.
4) Amendment to Paragraph 22 of the Lease. Paragraph 22 of the Lease is
amended to read as follows:
22. Distribution of Net Cash Proceeds.
(a) Net Cash Remaining (as hereinafter defined) will be allocated at the
end of each fiscal year for distribution as follows:
(i) one-third (1/3rd) to City (the "City Distribution Amount");
(ii) one-third (1/3rd) to charitable or non-profit recipients, and/or
allocated to Association accounts for use in advancing
Association's non-profit purposes in the discretion of
Association's board of directors (the "Charitable Distribution
Amount"); and
(iii) one-third (1/3rd) to the Schmitt Island Master Plan
Implementation Fund (as hereinafter defined) (the "Schmitt
Island Distribution Amount").
(b) Association shall distribute the City Distribution Amount for each
fiscal year to City by no later than the January 31 st following the end
of such fiscal year, or another date as mutually agreed upon by the
al
Page 352 of 797
parties. City shall use funds distributed to City under this
subparagraph 22(b) in the same manner and for the same purposes
that City is authorized to use rent payments under paragraph 3 of
this Lease.
(c) Association shall distribute the Charitable Distribution Amount for
each fiscal year to the following recipients by no later than the
December 31 st following the end of such fiscal year (however,
Association shall use reasonable efforts to make such distribution
before the September 1st following the end of such fiscal year), or
another date as mutually agreed upon by the parties, as follows:
(i) the first $1,000,000.00 of the Charitable Distribution Amount
shall be allocated to Association's Grants Program and retained
in a restricted Association account for ultimate distribution to the
various recipients thereof;
(ii) the next $428,571.43 of the Charitable Distribution Amount
shall be allocated to the Endowment Fund and distributed to the
Community Foundation of Greater Dubuque, except that the
allocation to the Endowment Fund may be used by Association
in Fiscal Years 2024 — 2028 until the current balance of the
Veterans' Memorial loan is paid in full; and
(iii) if the Charitable Distribution Amount exceeds $1,428,571.43,
the amount by which the Charitable Distribution Amount
exceeds $1,428,571.43 will be split, with 30% allocated to the
Endowment Fund and distributed to the Community Foundation
of Greater Dubuque and 70% retained in a restricted
Association account for ultimate distribution to the various
recipients of Association's charitable and nonprofit distributions
(including, but not limited to, Association's Grants Program and,
in Association's sole discretion, other dedicated funds which
Association may establish from time to time) except that the
allocation to the Endowment Fund may be used by Association
in Fiscal Years 2024 — 2028 until the current balance of the
Veterans' Memorial loan is paid in full.
(d) Association shall deposit the Schmitt Island Distribution Amount for
each fiscal year into the Schmitt Island Master Plan Implementation
Fund by no later than the December 31 St following the end of such
fiscal year.
(e) For purposes of this Lease including, without limitation, this
paragraph 22, the following terms have the following meanings-
5
Page 353 of 797
"Endowment Fund" means the irrevocable permanent endowment
established by Association in 2009 at the Community Foundation of
Greater Dubuque where the principal is invested, and only a portion
of the investment earnings is spent and the rest of the earnings are
directed back into the Endowment Fund, so that the endowment
grows over time. The portion of the Endowment Fund's investment
earnings that is permitted to be spent, and is not directed back into
the Endowment Fund, shall be available for distribution to other
charitable and non-profit recipients and distributed in the discretion
of Association's board of directors.
"fiscal year" means Association's fiscal year.
"Net Cash Remaining" means, for each fiscal year, Association's net
cash remaining after payment of and/or provision or reserve for the
following items:
(i) operational expenses and expenses for normal
replacement items;
(ii) provision for (A) operating funds, (B) capital
improvements, and (C) a cash reserve fund not to exceed
ten percent (10%) of Association's total budget for the
following fiscal year (the "Cash Reserve Fund"), which is
calculated each year and is not cumulative. Monies
deposited in the Cash Reserve Fund are the sole property
of Association and shall be designated for the sole
purpose of maintaining a cash balance for Association to
be used by Association as needed to fund its operations,
provided, however, that up to $2,500,000.00 of funds on
deposit in the Cash Reserve Fund may be used in fiscal
year 2023 and up to $500,000.00 of funds on deposit in
the Cash Reserve Funds may be used in fiscal year 2024
as a down payment on any construction loan incurred by
Association. Any interest accruing on the balance in the
Cash Reserve Fund shall also be available to Association
to fund operations;
(iii) required debt service payments (including prepayment of
debt, upon Board approval and City consent) for debt
incurred with the consent of City;
(iv) distributions to charities or non-profit entities from
operational funds, not to exceed the greater of Four
Hundred Fifty Thousand Dollars ($450,000.00) or sixty-
five (65) basis points (0.0065) of Association's adjusted
A
Page 354 of 797
gross receipts from all gambling games (slots and table
games);
(v) funds which Association is required to provide as
collateral or otherwise for purposes of obtaining and
securing any bond required by the Iowa Racing and
Gaming Commission pursuant to the Iowa Code;
(vi) payment into a capital reserve fund (the "Capital Reserve
Fund"), subject to a maximum annual payment of Five
Hundred Thousand Dollars ($500,000.00) per fiscal year,
for use in funding capital improvements or gambling
devices (including, but not limited to, gaming devices and
necessary hardware and/or software relating to the
installation or operation of such gaming devices) in the
discretion of Association; and
(vii) funds deposited into the Debt Payment Reserve Fund
pursuant to paragraph 4(b) of this Lease.
"Schmitt Island Master Plan Implementation Fund" means a
restricted Association account into which the Schmitt Island
Distribution Amount shall be deposited each fiscal year. The monies
held in the Schmitt Island Master Plan Implementation Fund,
together with all interest thereon, shall be used solely to advance,
pay for, and/or finance/fund any of the permitted purposes,
activities, and/or developments, contemplated by the Chaplain
Schmitt Island Master Plan adopted by Dubuque City Council, as
amended and as the same may be further amended, modified,
and/or restated from time to time, or to make contributions to the
Debt Payment Reserve Fund. The spending and distribution of
funds from the Schmitt Island Master Plan Implementation Fund,
which shall be solely for the purposes described above, shall be in
the discretion of a subcommittee of Association's board of directors
consisting of not less than four (4) nor more than eight (8) members
of Association's board of directors, the total number of which shall
be divisible by two (2). The members of such subcommittee shall
be appointed by the Chair of Association's board of directors and
shall consist of, at a minimum, Association's President and CEO,
the Chair of Association's board of directors, the City Manager and
at least one (1) city council member (who shall be the Mayor if the
Mayor is currently serving on Association's board of directors).
5) Reference to and Effect on the Lease. Except as expressly set forth in this
Amendment, all of the terms and provisions of the Lease are and shall remain in
full force and effect and are hereby ratified and confirmed. Unless the context
Page 355 of 797
requires otherwise or as otherwise expressly set forth herein, any references to
the Lease contained therein shall be deemed to refer to the Lease as amended by
this Amendment. The amendments provided for herein are limited to the specific
provisions of the Lease specified herein and shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of any party
under the Lease, or constitute a waiver or amendment of any other provision of the
Lease, except as and to the extent expressly set forth herein.
6) Counterparts. This Amendment may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. Delivery of a signature page of this Amendment by
telecopy or other electronic means shall be effective as delivery of a manually
executed counterpart hereof.
7) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Iowa.
8) Effectiveness of Amendment. The parties acknowledge and agree that this
Amendment must be approved by Association's Board of Directors, Association's
lender, the City Council of Dubuque, Iowa, and the Iowa Racing and Gaming
Commission. Accordingly, notwithstanding anything to contrary contained herein,
this Amendment shall become effective as of the date of receipt of the last of such
required approvals.
9) Memorandum for Recording. The parties mutually agree that, if necessary
or desirable for title purposes, a Memorandum of Second Amendment to Amended
and Restated Lease Agreement may be executed and filed of record in lieu of
recording this Amendment.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
A
Page 356 of 797
IN WITNESS WHEREOF, each of the parties hereto has executed this Second
Amendment to Amended and Restated Lease Agreement as of the date first written
above.
CITY OF DUBUQUE, IOWA
In
Brad M. Cavanagh, Mayor
Attest:
Adrienne N. Breitfelder, City Clerk
DUBUQUE RACING ASSOCIATION,
LTD.
By: '
Brian Rakestraw, Presi eland CEO
[Signature Page to Second Amendment to Amended and Restated Lease Agreement]
9
Page 357 of 797