Downtown Housing Incentive Awards_Second RecommendationMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Second Recommendation for Downtown Housing Incentive Awards
DATE: February 23, 2010
Dubuque
httrg
All- America City
1111 I
2007
Economic Development Director Dave Heiar recommends City Council approval for
staff to negotiate a loan agreement in the amount of $226,000 with B &C Cathedral
Development, LLC. for creation of 24 market rate housing units to be located at 205
Bluff Street This funding comes from the incentive pool established to create new
residential housing units in Downtown Dubuque.
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
Masterpiece on the Mississippi
TO: Michael Van Milligen, City Manager
FROM: David J. Heiar, Economic Development Director
SUBJECT: Second Recommendation for Downtown Housing Incentive Awards
DATE: February 23, 2010
Dubuque
kraal
All- Ammica cnr
2007
INTRODUCTION
This memo is to recommend funding for B &C Cathedral Development, LLC. from the
incentive pool established to create new residential housing units in downtown
Dubuque.
BACKGROUND
Dubuque has been successful in encouraging job creation in the community for several
years. Several great projects have begun or continue this year including:
• IBM is currently hiring new employees to reach 1,300 employees in Dubuque by
the end of 2010. Many new hires are coming from outside the community.
• Hormel Foods will begin operations this winter in their facility on Chavenelle
Court.
• Medline Industries has been growing steadily and has additional capacity in their
new facility. Corporate management is committed to growing the operation in
Dubuque.
In fact, the Greater Dubuque Development Corporation is currently working with 40 local
companies who are recruiting employees (i.e. McGraw Hill, Cottingham & Butler,
Prudential, Medical Associates). The City does not want to reduce the ability of the
existing businesses in Dubuque from expanding or replacing employees because of the
lack of housing.
Due to this influx of new positions created in Dubuque and with the employee
recruitment of other existing businesses, the Greater Dubuque Development
Corporation (GDDC) has hired Shannon Gaherty as the Newcomer Relations
Coordinator. Shannon helps new residents find housing, get information about the
community, and get connected with services and organizations within the community.
GDDC has expressed difficulties in finding quality housing, particularly in the downtown
area. Many of Dubuque's new residents have a strong desire to live near work and
entertainment. Downtown housing options must be created for Dubuque businesses to
attract and retain a quality workforce.
In November 2009, the City Council approved the creation of a $2.5 million incentive
pool to encourage new residential units within the Greater Downtown Urban Renewal
District. The pool of funds was generated by delaying approved CIP projects and use of
the funding to provide approximately $2.5 million for this program. The following is a list
of CIP projects reduced or delayed to facilitate the borrowing:
• Port of Dubuque Improvements
• Millwork District Street Reconstruction
• Millwork District Streetscape Improvements
• Millwork District Fiber Optics
• $100,000 not needed for demolition of a portion of the old Tri -State building being
purchased from the Iowa DOT
• Approximately $45,000 savings per year in the Greater Downtown Urban
Renewal District from the refinancing of America's River bonds
Based on the guidelines of this new program, up to $10,000 of financial assistance
would be available for each new unit of market rate residential housing created in the
downtown area.
DISCUSSION
The deadline for submitting applications was December 21, 2009 and 15 applications
were received requesting over $4 million in incentives. A selection committee has
reviewed the applications. The committee included:
• Dave Heiar, Economic Development Director
• Rick Dickinson, Greater Dubuque Development
• Barry Lindahl, City Attorney
• Guy Hemenway, Assistant Planner
• Steve Brown, Engineering Project Manager
• Aaron DeJong, Asst. Economic Development Director
Proposals were evaluated on several criteria. The criteria included:
• Timeliness /Readiness
• Cost/Benefit
• Impact
• Additional benefits of proposed project (i.e. exterior rehab, historic preservation,
LEED, Commercial Development)
• Magnitude of other City financial assistance being requested
The committee had concerns with the quality of some of the applications. Several of the
larger projects had many financial contingencies which would be detrimental to meeting
the timeframe specified in the RFP (December 2010). However, several of the projects
have shown the capacity to complete the units before the end of 2010 and have
financing committed to the project. Four projects were previously approved by the City
Council. The committee is still doing due diligence and negotiating with some of the
developers to determine if they can meet the timeframes and merit a commitment of city
assistance.
RECOMMENDATION
The committee is recommending a low interest loan be made to B &C Cathedral
Development, LLC. for the creation of 24 units located at 205 Bluff Street. The following
are the terms suggested for the project:
Loan Amount: $226,000
Term: 10 Years
Rate: 2%
Payment Frequency: Monthly
The committee is recommending that $226,000 of the available funds be set aside for
the 205 Bluff project.
ACTION STEP
The action step is to approve the attached resolution authorizing staff to negotiate a
loan agreement with B &C Cathedral Development, LLC and allow the City Manager to
execute agreements with the property owner to commit to the market rate housing unit
creations. A sample of the proposed agreement format is attached.
F: \USERS\Econ Dev \Downtown Housing\20100223 Housing Incentive Recommendation #2.doc
Prepared by: David Heiar, Economic Dev Director, 50 West 13 Street, Dubuque IA 52001 563 589 -4393
Return to: Jeanne Schneider, City Clerk, 50 West 13 Street, Dubuque IA 52001 563 589 -4121
RESOLUTION NO. 68 -10
APPROVING AN AWARD TO B &C CATHEDRAL DEVELOPMENT, LLC FROM THE
DOWNTOWN HOUSING INCENTIVE POOL TO CREATE NEW MARKET -RATE
HOUSING UNITS WITHIN THE GREATER DOWNTOWN URBAN RENEWAL DISTRICT
Whereas, the City of Dubuque has been successful in encouraging job creation and
retention in the community for several years; and
Whereas, many of the City of Dubuque's new residents have a strong desire to live
near work and entertainment; and
Whereas, a significant shortage of quality market -rate rental and owner - occupied
residential units exists and efforts are needed to encourage new development of such
units; and
Whereas, several downtown residential development projects need financial
assistance to secure funding for such project; and
Whereas, the City received several applications for assistance from a Request for
Proposals due December 21, 2009; and
Whereas, such proposals have been reviewed by a recommendation committee.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
DUBUQUE, IOWA:
Section 1. The City Council approves B &C Cathedral Development, LLC to
receive a low interest loan in the amount of $226,000 to assist in the creation of 24 market
rate apartments at 205 Bluff Street.
Section 2. That the City Manager is hereby authorized and directed to execute an
Incentive Agreement with B &C Cathedral Development, LLC.
Passed, approved and adopted this 1 st day of March, 2010.
Attest:
eanne F. Schneider, City Clerk
F: \USERS \Econ Dev \Downtown liousing\20100301 Resolution Downtown Award #2.doc
Roy D. Buol, Mayor
DOWNTOWN HOUSING PROGRAM
INCENTIVE AGREEMENT
BETWEEN
THE CITY OF DUBUQUE, IOWA
AND
B &C CATHEDRAL DEVELOPMENT, LLC.
This Agreement, dated for reference purposes the day of , 2010, is
made and entered into by and between the City of Dubuque, Iowa (City), a municipal
corporation organized and existing under the laws of the State of Iowa and B &C Cathedral
Development, LLC (Owner).
Whereas, the Owner's property at 205 Bluff Street (the Building) is located within the
boundaries of the Greater Downtown Urban Renewal District (the District); and
Whereas, the goals and objectives of the Greater Downtown Urban Renewal Plan
(the Plan) provide for the creation of the financial incentives creating housing opportunities
within the District; and
Whereas, City desires to assist Owner in its efforts to create housing opportunities
within the District through the Downtown Housing Incentive Program (the Incentive
Program).
NOW THEREFORE, in consideration of the premises and respective covenants,
agreements and representations hereinafter set forth, the parties agree as follows:
SECTION 1. HOUSING UNIT CREATION. The Owner commits to creating new market -
rate rental units as described in Section 25(2) (the Project) within the Building.
SECTION 2. SOURCE OF FUNDS. City has allocated funds sufficient to carry out its
obligations under this Agreement.
SECTION 3. HOUSING LOAN.
3.1 City agrees to provide to Owner on the terms and conditions set forth herein a Loan in
the amount of Two Hundred Twenty -Six Thousand Dollars ($226,000) (the Loan) that shall
consist of Incentive Program funds.
3.2 The term of the Loan shall be Ten (10) years. Interest on the Loan shall be Two
percent (2.0 %) per annum. Monthly interest payments shall become due and payable the
first month of the Loan. Monthly interest and principal payments, amortized over a nine year
period, shall become due and payable beginning the Twelfth (12 month of the Loan. The
entire balance of the Loan, including interest and principal, shall become due and payable
not later than the 120 month of the Loan.
3.3 At the time of the initial disbursement of Loan funds to Owner, Owner shall execute
the Promissory Note in the form attached hereto as Exhibit A payable to the order of the City
F: \USERS \Econ Dev \Lofts at Cathedral Square\Downtown Housing Incentive\Downtown Housing Incentive Loan Cathedral.doc
of Dubuque, Iowa in the principal amount of the Loan and the Mortgage in the form attached
hereto as Exhibit B.
3.4 Loan funds shall be disbursed to Owner by City for Qualifying Project Expenses,
defined in Section 25(3), for amounts not in excess of the total sum in Section 3.1.
3.5 Owner shall furnish to City written requests for disbursement of the Loan funds. Such
requests shall be accompanied by a statement of Owner's Qualifying Project Expenses and
appropriate documentation of such expenses. It is expressly understood that all funds
Loaned under this Agreement shall be used by Owner only for the purpose of paying the
Qualifying Project Expenses set forth in such written requests.
3.6 Owner shall substantially complete the Project in accordance with the terms of this
Agreement on or before December 31, 2010. City shall not be obligated to pay any funds
not drawn by Owner as of said date and any undrawn funds as of such date shall be
credited against the balance due on the Promissory Note.
3.7 The Loan shall be secured by the Mortgage. On the Closing Date, the expected
market value of the Building following completion of the Project (as determined by the City,
in its sole discretion) shall be equal to at least 115% of the unpaid balance of all loans
secured by mortgages on the Building, including the Promissory Note and Mortgage granted
to the City under this Agreement.
SECTION 4. STATUS OF OWNER. Owner represents that it is a Limited Liability
Company duly organized and existing under the laws of the State of Iowa; that it is
authorized to borrow under this Agreement, to execute and deliver the Note and otherwise
perform the obligations of this Agreement; that it has authority and power to own its property
and conduct its business as it is currently carried on; that the performance of its obligations
under this Agreement and the issuance of any note under it will not conflict with any
provision of law, the Articles of Incorporation or the Bylaws of Corporation, or any agreement
binding on it. Owner also represents, except as disclosed in writing to City, that it is not a
party to any pending or threatened litigation or to any proceeding or action for the
assessment or collection of additional taxes, and that it knows of no known contingent
liabilities not provided for or disclosed in the financial statement provided City which would
affect the ability of the Owner to repay the Loan.
SECTION 6. FINANCIAL CONDITION OF OWNER. Owner has delivered to City
evidence of Owner's ability to complete the Project as of the date of application for financial
assistance which fairly represents the financial condition of Owner as of the date stated, all
in accordance with generally accepted accounting principles consistently applied, and that
the statements still correctly reflect the financial condition and status of its operations as of
the date of this Agreement.
SECTION 7. TITLE OF OWNER. Subject to the liabilities reflected on Owner's financial
statement as well as those incurred in relation to this Project, Owner represents that it has
good and marketable title, free and clear of any mortgage, pledge, lien, security interest,
encumbrance, or charge to all those assets reflected on the financial statement and to
assets since acquired. Taxes not due or payable or otherwise delinquent are excepted.
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SECTION 8. CONDITIONS OF BORROWING.
8.1 On the date on which any sum is to be borrowed, Owner, in addition to the
Promissory Note and Mortgage, shall deliver to City such other papers and documents as
may be required to comply with the conditions of this Agreement, as counsel for City may
reasonably request.
8.2 Owner shall be required at the Closing Date defined herein Section 25(1) to comply,
or establish compliance, as follows:
(1) That the representations and warranties of Owner are correct on the Closing
Date;
(2) That Owner has fully complied with the covenants and agreements to the
extent required before the Closing Date;
(3) That no default or event which might mature into a default has occurred or
continues to the Closing Date;
(4) That no litigation or proceeding is pending against Owner which would
materially affect the assets of Owner, taking into account the entire assets and overall
business of Owner;
(5) That there has been no material adverse change in the financial condition of
Owner from that shown by the financial statement delivered to City under Section 6.
(6) That no fire or casualty has occurred in any building or to any inventories or
property of Owner that might substantially, adversely affect the conduct of its
business.
SECTION 9. HISTORIC CHARACTER. All exterior work shall coincide with the historic
character of the building.
SECTION 10. COVENANTS OF OWNER. Owner covenants that it will at all times while
the Mortgage and Promissory Note are outstanding:
(1) Correct code deficiencies in accordance with all applicable building and fire
codes within the scope of the project.
(2) Provide for the repair and rehabilitation of the Building in accordance with all
applicable building, zoning, fire, and housing codes.
(3)
Substantially complete the Project on or before December 31, 2010.
(4) Maintain at all times insurance to the extent and against such hazards and
liabilities as are in keeping with the current insurance program of Owner, set forth in
Exhibit C attached hereto and entitled "Certificate of Insurance ". Said certification
shall be renewed on an annual basis and provided to City within thirty (30) days of the
anniversary date of this Agreement.
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(5) Pay when due all taxes, assessments and other liabilities, except those
contested in good faith where notice of such contest has been given to the City.
(6) Not create or permit to exist any other pledge, security interest, lien or other
encumbrance on the security for this Agreement provided in Section 3 above and the
Promissory Note provided pursuant to this Agreement without written consent of City.
(7) Give prompt notice in writing to City of any adverse development, financial or
otherwise, which would materially affect its business, properties or affairs, or the
ability of Owner to perform its obligations under this Agreement or the Note executed
pursuant to the terms of this Agreement.
(8) Use funds only for purposes authorized herein.
(9) Pay all recording and filing fees, mortgage taxes, documentary stamps, and
any other taxes payable in connection with this transaction.
SECTION 11. DEFAULT. Owner shall be in default upon the occurrence of any of the
following events:
(1) Owner fails to pay any installment of principal or interest on any note (whether
to City or any other public or private lender) when due or within thirty (30) days
thereafter;
(2) Owner becomes insolvent or admits in writing its inability to pay its debts as
they mature; or applies for, consents to or acquiesces in the appointment of a trustee
or receiver for any of its property; or in the absence of an application for consent or
acquiescence, a trustee or receiver is appointed for it or a substantial part of its
property and is not discharged within ten (10) days; or it otherwise commits an act of
bankruptcy; or any bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding
is instituted by or against it and if instituted is consented to or acquiesced in by it or
remains for ten days undismissed;
(3) Owner fails in the performance of any of the terms and conditions of this
Agreement and such non - performance continues for ten (10) days after written notice
thereof from City or from the holder of a note;
(4) Any warranty made by Owner is untrue in any material respect, or any
schedule, statement, report, notice or writing furnished by Owner to City is untrue in
any material respect on the date as of which the facts set forth are stated or certified,
provided any such error is not the result of unintentional errors which are capable of
correction without prejudice to the City;
(5) Any government board, agency, department, commission or public or private
lender takes possession or control of any substantial part of any property of Owner.
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SECTION 12. ACCELERATION AT OPTION OF CITY. If any event of default occurs,
City may, after ten days written notice of default to Owner, declare the Promissory Note
immediately due and payable, at which time all unpaid principal and interest shall
immediately become due and payable. City shall promptly advise Owner in writing of any
acceleration under this section, but the failure to do so shall not impair the effect of such
declaration.
SECTION 13. MAINTENANCE OF RECORDS AND RIGHT TO INSPECT. Owner shall
keep and maintain books, records and other documents relating directly to the receipt and
disbursement of program funds; and any duly authorized independent accounting
representative of City shall at all reasonable times have access to and the right to inspect,
copy, audit and examine all such books and other documents of Owner pertaining to the
project until the completion of all close out procedures respecting City's Loan and the final
settlement and conclusion of all issues arising out of said Loan.
SECTION 14. ADDRESS. Owner's principal business address is:
Chad Walsh
B &C Cathedral Development, LLC
600 Star Brewery Drive
Dubuque, IA 52001
Owner shall promptly give City written notice of any further change in its principal
office address.
City's address is:
City Manager
City Hall
50 West 13th Street
Dubuque, Iowa 52001
SECTION 15. LIMITATION OF CITY'S LIABILITY FOR PROJECT ACTIVITIES. City
shall not be liable to Owner, or to any party, for the completion of, or the failure to complete,
any activities which are part of the Project, except as may be specifically provided in this
Agreement or other written agreements between City and Owner or any of Owner's affiliates
or subsidiaries. Owner agrees to indemnify, hold harmless and defend City from any such
claims.
SECTION 16. CONFLICT OF INTEREST. Owner certifies that to its knowledge no
member, officer or employee of City, or its designees or agents, nor any consultant or
member of the governing body of City, and no other public official of City who exercises or
has exercised any functions or responsibilities with respect to the Project during his or her
tenure, or who is in a position to participate in a decision making process or gain inside
information with regard to the Project, has nor shall have any interest, direct or indirect, in
any contract or subcontract, or in any activity, or benefit therefrom, which is part of this
Project at any time during or for one year after such person's tenure.
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SECTION 17. NONDISCRIMINATION. In carrying out the Project, Owner shall not
discriminate against any employee or applicant for employment or tenancy because of race,
religion, color, sex, sexual orientation, national origin, age or disability. Owner shall post in a
conspicuous place, available to employees and applicants for employment, notices to be
provided by City setting forth the provisions of this nondiscrimination clause. Owner shall
state that all qualified applicants will receive consideration for employment without regard to
race, religion, color, sex, sexual orientation, national origin, age or disability.
SECTION 18. DISCLAIMER OF RELATIONSHIPS. Nothing contained in this Agreement
between the parties, nor any act of City or Owner, shall be deemed or construed by any of
the parties, or by any third persons, to create any relationship of third party beneficiary,
principal or agent, limited or general partnership, or joint venture.
SECTION 19. NOTICE. Any notice, if mailed by United States certified mail, shall be
deemed given when mailed, postage prepaid, addressed to the other party at its address
shown above, or at any other address subsequently designated by either party to the other.
SECTION 20. SUCCESSORS AND ASSIGNS. All covenants, representations, warranties
and agreements herein set forth shall be binding upon Owner, and its legal representatives,
successors and assigns. This Agreement may not be assigned by City or Owner, without
the express written consent of the other party.
SECTION 21. LEGALITY. If any provision of this Agreement shall, for any reason, be
held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any
other provision hereof, but this Agreement shall be construed as if such invalid or
unenforceable provision had never been contained herein.
SECTION 22. GOVERNING LAW. This Agreement and all rights and duties hereunder,
including but not limited to all matters of construction, validity and performance shall be
governed by the laws of the State of Iowa.
SECTION 23. SURVIVAL OF REPRESENTATIONS. All representations or warranties of
Owner shall survive the execution and delivery of this Agreement and any note executed
and delivered under it, and no investigation by City, nor any closing shall affect the
representations or warranties or the right of City to rely on and enforce them.
SECTION 24. DELAY. No delay on the part of City or the holder of any note in the
exercise of any right shall operate as a waiver, nor shall any single or partial exercise of any
right preclude other or additional exercise of any right.
SECTION 25. DEFINITIONS.
(1) "Closing Date" shall mean the date on which this Agreement is executed by
the parties.
(2) "Project" shall mean the rehabilitation project of Owner's property at 205 Bluff
Street, identified in Owner's application for financial assistance. Said application is on
file in the office of the Economic Development Department, 50 West 13th Street,
6
Dubuque, Iowa 52001. The Project shall include the creation of 24 new market rate
residential housing units at a cost of not less than $ 3,900,000.
(3) "Qualifying Project Expenses" shall mean those expenditures or expenses
incurred by Owner during and for the Project and identified in the Owner's application
for financial assistance, whether paid to third parties or incurred as wage expense,
fringe benefit expense or other costs of Owner's employees, agents and contractors.
(4) "New rental housing unit" shall mean either a rental housing unit created
where one did not previously exist, or an existing rental housing unit which has been
unlicensed and unoccupied for a period of not less than five years prior to the date
of this Agreement.
SECTION 26. CERTIFICATION OF COMPLIANCE WITH CITY CODES. By signing this
Agreement, Owner certifies that all property in the City of Dubuque owned by Owner or in
which Owner has any interest, other that the Project property, complies with all applicable
City of Dubuque ordinances and regulations, including, but not limited to, housing, building,
zoning, fire, health, and vacant and abandoned building regulations.
CITY OF DUBUQUE, IOWA OWNER
Michael C. Van Milligen, City Manager Chad Walsh
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Managing Member