Loading...
Dubuque Initiatives_Roshek Building 4th Amendment to Development Agreement Copyright 2014 City of Dubuque Action Items # 2. ITEM TITLE: Dubuque Initiatives -4th Amendment to Development Agreement for Roshek Building SUMMARY: City Manager recommending approval of an amendment to the Development Agreement between the City of Dubuque and Dubuque Initiatives for the redevelopment of the Historic Roshek Building. RESOLUTION Approving the Fourth Amendment to the Development Agreement Between the city of Dubuque, Iowa and Dubuque Initiatives SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Adopt Resolution(s) ATTACHMENTS: Description Type 4th Amendment to De\elopment Agreement with Staff Memo Dubuque Initiatives-MVM Memo Staff Memo Staff Memo 4th Amendment to DA Supporting Documentation Resolution of Approval Resolutions THE CITY OF Dubuque DUB E i" Masterpiece on the Mississippi 2007.2012.2013 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Fourth Amendment to Development Agreement with Dubuque Initiatives DATE: February 2, 2017 Economic Development Director Maurice Jones is recommending approval of an amendment to the Development Agreement between the City of Dubuque and Dubuque Initiatives for the redevelopment of the Historic Roshek Building. The amendment would insert a non-appropriation clause into the agreement, with the result being the reduction of the amount of the statutory debt limit used by the City. A Development Agreement between the City and Dubuque Initiatives was approved on February 17, 2009 to provide incentives and a guaranty for the redevelopment of the Roshek Building. The New Markets Tax Credit (NMTC) structure for financing the Roshek Building redevelopment required a seven-year compliance period, during which the debt could not be refinanced. That compliance period ended in June 2016, and staff have worked with the Dubuque Initiatives board to unwind that NMTC structure in order to allow for the refinancing of the debt. This seemed like the appropriate time to also approach the Dubuque Initiatives board with a request to include a non-appropriation clause in the Development Agreement with the City for the Roshek redevelopment. The City now includes this clause in all new development agreements. By including the non-appropriation clause in the Agreement, the City will see a significant reduction in the use of its constitutional debt limit, as only one year of tax increment (TIF) rebates (approx. $273,600) will count against the debt limit at any given time instead of the full amount covered by the Agreement (approx. $3,556,800). This is still considered a contractual obligation of the City and failure to make one or more payments due to non-appropriation might trigger a downgrade of the bond rating for all City debt, make it difficult to sell future offerings, and damage the City's relationship with current and future development partners. I concur with the recommendation and respectfully request Mayor and City Council approval. Mic ael C. Van Milligen' MCVM:jh Attachment cc: Crenna Brumwell, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Maurice Jones, Economic Development Director 2 Dubuque Economic Development Department THE CITY OF 50 West 13th Street All-AmericaCitY Dubuque,Iowa 52001-4864 DUB36kE1 ' Office(563)589-4393 TTY(563)690-6678 ® http://www.cityofdubuque.org Masterpiece on the Mississippi 200.2012.2013 TO: Michael Van Milligen, City Manager FROM: Maurice Jones, Economic Development Director SUBJECT: Fourth Amendment to Development Agreement with Dubuque Initiatives DATE: January 31, 2017 INTRODUCTION The purpose of this memorandum is to seek City Council approval of a resolution amending the Development Agreement between the City of Dubuque and Dubuque Initiatives for the redevelopment of the Historic Roshek Building. The amendment would insert a non-appropriation clause into the agreement, with the result being the reduction of the City's debt limit usage. BACKGROUND A Development Agreement between the City and Dubuque Initiatives was approved on February 17, 2009 and amended on April 29, 2009 and May 16, 2011 to provide incentives and a guaranty for the redevelopment of the Roshek Building, as well as on September 6, 2011 to assign proceeds from Historic Tax Credits to the building's indebtedness covered by the Guaranty. DISCUSSION The New Markets Tax Credit (NMTC) structure for financing the Roshek Building redevelopment required a seven-year compliance period, during which the debt could not be refinanced. That compliance period ended in June 2016, and staff have worked with the Dubuque Initiatives board, its legal counsel, Roshek Building property management staff, Honkamp Krueger, and others to unwind that NMTC structure in order to allow for the refinancing of the debt. This seemed like the appropriate time to also approach the Dubuque Initiatives board with a request to include a non-appropriation clause in the Development Agreement with the City for the Roshek redevelopment. The board has agreed to the clause, which is presented in the attached agreement. By including the non-appropriation clause in the Agreement, the City will see a significant reduction in the use of its constitutional debt limit, as only one year of tax increment (TIF) rebates (approx. $273,600) will count against the debt limit at any given time instead of the full amount covered by the Agreement (approx. $3,556,800). This is still considered a contractual obligation of the City and failure to make one or more payments due to non-appropriation might trigger a downgrade of the bond rating for all City debt, make it difficult to sell future offerings, and damage the City's relationship with current and future development partners. RECOMMENDATION/ ACTION STEP I recommend approving the attached resolution allowing the Mayor to sign the 4h Amendment to Development Agreement, which includes a non-appropriation clause. RESOLUTION NO. 49-17 APPROVING THE FOURTH AMENDMENT TO THE DEVELOPMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND DUBUQUE INITIATIVES WHEREAS, the City of Dubuque, Iowa (City) and Dubuque Initiatives (Developer) are parties to a Development Agreement dated February 17, 2009 (the Agreement), as amended on April 27, 2009, May 16, 2011, and September 6, 2011, relating to the redevelopment of the Roshek Building located generally at 700 Locust Street in the City (defined in the Original Agreement as the Property); and WHEREAS, Section 3.1 of the Agreement obligates the City to provide Developer with an Economic Development Grant; and WHEREAS, City and Developer desire to amend the Agreement to include a non -appropriation clause with respect to the Economic Development Grant as set forth in the Fourth Amendment, attached hereto. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA, AS FOLLOWS: Section 1. The Fourth Amendment to Development Agreement attached hereto is hereby approved and the Mayor is authorized and directed to sign the Fourth Amendment on behalf of the City of Dubuque. Section 2. All other provisions of the Agreement shall remain in full force and effect. Passed, approved and adopted this 6th day of February, 2017. Attest: Trish L. Gleason, CMC, Assistant City Clerk F:\Users\Laserfiche Legal\IBM\Resolution Approving Fourth Amendment to DI DA_111416.doc U Roy D. Buol, Mayor FOURTH AMENDMENT TO DEVELOPMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND DUBUQUE INITIATIVES This Fourth Amendment to Development Agreement (the Amendment) dated, for reference purposes the (� day of r"brLec,c- U, is made and entered into by and between the City of Dubuque, Iowa, a municipality (City) established pursuant to the Iowa Code and acting under the authorization of Iowa Code Chapter 403, as amended, and Dubuque Initiatives, an Iowa -not-for-profit corporation (Developer). WHEREAS, City and Developer are parties to a Development Agreement dated February 17, 2009 (the Agreement), as amended on April 27, 2009, May 16, 2011, and September 6, 2011, relating to the redevelopment of the Roshek Building located generally at 700 Locust Street in the City; and WHEREAS, Section 3.1 of the Agreement obligates the City to provide Developer with an Economic Development Grant; and WHEREAS, City and Developer desire to amend the Agreement to include a non -appropriation clause with respect to the Economic Development Grant as set forth herein. NOW, THEREFORE, it is agreed by the parties as follows: 1. Section 3.1 of the Agreement is amended by adding the following new subsection 5: (5) Non -Appropriation. Notwithstanding anything in this Agreement to the contrary, the obligation of City to pay any installment of the Economic Development Grant from the pledged tax increment revenues shall be an obligation limited to currently budgeted funds, and not a general obligation or other indebtedness of City or a pledge of its full faith and credit within the meaning of any constitutional or statutory debt limitation, and shall be subject in all respects to the right of non -appropriation by the City Council of City as provided in this Section. City may exercise its right of non -appropriation as to the amount of the installments to be paid during any fiscal Year during the term of this Agreement without causing a termination of this Agreement. The right of non - appropriation shall be exercised only by resolution affirmatively declaring City's election to non -appropriate funds otherwise required to be paid in the next fiscal year under this Agreement. 111416ba1 In the event the City Council of City elects to not appropriate sufficient funds in the budget for any future fiscal year for the payment in full of the installments on the Economic Development Grant due and payable in that future fiscal year, then City shall have no further obligation to Developer for the payment of any installments due in that future fiscal year which cannot be paid with the funds then appropriated for that purpose. The right of non -appropriation reserved to City in this Section is intended by the parties, and shall be construed at all times, so as to ensure that City's obligation to pay future installments on the Economic Development Grant shall not constitute a legal indebtedness of City within the meaning of any applicable constitutional or statutory debt limitation prior to the adoption of a budget which appropriates funds for the payment of that installment or amount. In the event that any of the provisions of this Agreement are determined by a court of competent jurisdiction to create, or result in the creation of, such a legal indebtedness of City, the enforcement of the said provision shall be suspended, and the Agreement shall at all times be construed and applied in such a manner as will preserve the foregoing intent of the parties, and no event of default shall be deemed to have occurred as a result thereof. If any provision of this Agreement or the application thereof to any circumstance is so suspended, the suspension shall not affect other provisions of this Agreement which can be given effect without the suspended provision, and to this end the provisions of this Agreement are severable. 2. All other terms and conditions of the Development Agreement shall remain in full force and effect. CITY OF DUBUQUE, IOWA DUBUQU TIATIVES By: By: Kevin S Firnstahl, City Clerk Trish L. Gleason, Assistant City Clerk Roy D.B`,Mayor By: is M. Aviles, President F:\Users\Laserfiche Legal\IBM\Development Agreement & Amendments\2016 1114 Fourth Amendment To Development Agreement_DRAFT.doc 2