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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. 2 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. 3 (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. 4 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. 5 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 7 Managing Member