Dbq Area Ind. Devel C Tax IncreTO:The Honorable Mayor and City Council Members
MEMORANDUM
April 28, 2003
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Tax Increment Financing for the Dubuque Area Industrial Development
Corporation
On October 25, 1999, the City Council approved a Development Agreement with
Dubuque Area Industrial Development Corporation (DAIDC) for the sale and
development of Lot 1 in the Dubuque Industrial Center West for a 40,000 square foot
speculative industrial building costing not less than $900,000. The DAIDC agreement
did not raquira the corporation to create jobs except to make best efforts in that regard
to sell or lease the property to an employer who would create new jobs or retain existing
jobs in the community. The Development Agreement provided for an acquisition grant
to DAIDC that was equal to the full pdce of the land with the stipulation that should
DAIDC sell the developed property at a profit, the City would recoup a portion of the
acquisition grant (land price). No other public financial assistance was provided to the
project at that time.
By 2001, DAIDC had not sold the property and requested a property tax exemption on
the building. State law allows the exemption for non-profit corporations owning vacant,
speculative industrial properties. Currently, taxes are paid on the land value only, about
$7,000 per year.
In 1999, DAIDC took a risk in developing and financing the industrial spec building
project that was the inaugural development in the new west-side industrial park. The
development of a spec building was part of an overall economic development marketing
and recruitment strategy to spur new opportunities for the community. The project was
also essential in helping the City win RISE funding for Chavenelle Ddve.
The building has been vacant until recently when DAIDC entered into a 3-year lease
with a local import/export company, DDI, for a portion of the building. DDI currently
employs 15 persons and expects to add 5 additional employees over the next two
years. Since the building is no longer vacant, however, the property is no longer eligible
for property tax exemption. The DDI lease will provide DAIDC funds to cover its debt
service obligations, but is insufficient to pay the estimated $31,500 increase in yearly
property taxes.
DAIDC has asked the City to support their project by approving the use of tax increment
proceeds to make reimbursement to DAIDC of the actual new increment of property
taxes that they will pay over the next ten years, which is expected to be approximately
$315,000.
Economic Development Director Bill Baum is recommending City Council approval of
the issuance of tax increment revenue obligations for the Dubuque Area Industrial
Development Corporation and that a public hearing be set for May 19, 2003.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
____________________
Michael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
William Baum, Economic Development Director
CITY OF DUBUQUE, IOWA
MEMORANDUM
April 25, 2003
TO:Michael Van Milligen, City Manager
FROM:William Baum, Economic Development Director
SUBJECT:Tax Increment Financing for the Dubuque Area Industrial
Development Corporation
INTRODUCTION
This memorandum presents for City Council review and approval a Resolution setting
for public hearing the proposed issuance of tax increment revenue obligations for the
Dubuque Area Industrial Development Corporation (DAIDC). The public hearing would
be held on May 19, 2003. A letter from Rick Dickinson, on behalf of DAIDC, is attached
requesting the tax increment financing assistance.
BACKGROUND
On October 25, 1999, the City Council approved a Development Agreement with
DAIDC for the sale and development of Lot 1 in the Dubuque Industrial Center West for
a 40,000 square foot speculative industrial building costing not less than $900,000.
The DAIDC agreement did not require the corporation to create jobs except to make
best efforts in that regard to sell or lease the property to an employer who would create
new jobs or retain existing jobs in the community. The Development Agreement
provided for an acquisition grant to DAIDC that was equal to the full price of the land
with the stipulation that should DAIDC sell the developed property at a profit, the City
would recoup a portion of the acquisition grant (land price). No other public financial
assistance was provided to the project at that time.
By 2001, DAIDC had still not sold the property and requested a property tax exemption
on the building. State law allows the exemption for non-profit corporations owning
vacant, speculative industrial properties. Currently, taxes are paid on the land value
only, about $7,000 per year.
DISCUSSION
In 1999, DAIDC took a risk in developing and financing the industrial spec building
project that was the inaugural development in the new west-side industrial park. The
development of a spec building was part of an overall economic development marketing
and recruitment strategy to spur new opportunities for the community. The project was
also essential in helping the City win RISE funding for Chavenelle Drive.
The building has been vacant until recently when DAIDC entered into a 3-year lease
with a local import/export company, DDI, for a portion of the building. DDI currently
employs 15 persons and expects to add 5 additional employees over the next two
years. Since the building is no longer vacant, however, the property is no longer eligible
for property tax exemption. The DDI lease will provide DAIDC funds to cover its debt
service obligations but is insufficient to pay the estimated $31,500 increase in yearly
property taxes.
DAIDC has asked the City to support their project by approving the use of tax increment
proceeds to make reimbursement to DAIDC of the actual new increment of property
taxes that they will pay over the next ten (10) years. The total reimbursement from tax
increment revenues over the ten (10) year period is expected to be $315,000, more or
less. It is not clear yet what impacts legislation being considered by the Iowa
Legislature may have on these resources.
It is proposed that following the public hearing, the City Council would enter into a First
Amendment to Development Agreement (attached for your review) with DAIDC that
sets forth the terms for reimbursement of the TIF revenues generated from the
property. The annual TIF reimbursement would apply only to DAIDC as owner of the
property.
RECOMMENDATION
I recommend that the City Council adopt the attached Resolution setting a date for
public hearing on the proposed use of tax increment proceeds to support DAIDC's
speculative industrial building project in the Dubuque industrial Center West.
ACTION STEP
The action step for the City Council is to adopt the attached Resolution.
attachments
F:\US ERS~Pm~hre\WPDOCS~LOANDOC\DAIDC\TIF.M EM.doc
April 25, 2003
Mr. William J. Baum
Economic Development Director
City of Dubuque
50 W. 13th Street
Dubuque, Iowa 52001
Dear Bill:
Please accept this request of the City of Dubuque for a 10 year TIF Rebate for the Dubuque Area
Industrial Development Corporation (DAIDC) spec building located at 7425 Chavenelle Drive.
This consideration by the City of Dubuque will allow DA1DC to cash flow the lease of this
facility to DDI, Inc., a fast growing start-up company that projects a $1,300,000 payroll in 2003.
The incentive will allow DDI, Inc. to lease 15,000 sq. ft. of warehousing space and 3,200 sq. ft.
of office space at $4.12 per sq. ft. or $75,000 per year. The remaining 25,000 sq. ft of
warehousing space will be leased to a second tenant.
DDI, Inc. is an S Corporation started in Dubuque in 1999. The partners in this import/export
company are Dr. J.B. Priest and Dr. Zhenhai Li. The 15 employees in Dubuque and 6 employees
in Kent, Washington had a combined payroll in 2002 of $930,000 and DDI, Inc. projects they
will hire five new Dubuque employees in the next 24 months for an annual payroll of $1,300,000
or an average of $50,000 per employee.
DDI, Inc. custom designs import programs for manufacturers, retailers and ag equipment
distributors with satellite offices in Japan and Europe.
Under the lease purchase agreement, DAIDC is responsible for 100% of property taxes that
presently run approximately $7,000 per year. Without TIF, DAIDC's property tax obligation
will increase by over $31,000 per year.
We appreciate the City's consideration of our request and we are excited about DDI, Inc.'s future
here in the Greater Dubuque area.
Should you have any questions regarding their project, please contact our office at 557-9049.
Sincerely,
Rick Dickinson
Director
RESOLUTION NO. 143-03
FIXING THE DATE FOR A MEETING OF THE CITY COUNCIL OF THE CITY OF
DUBUQUE, IOWA ON THE PROPOSED ISSUANCE OF URBAN RENEWAL TAX
INCREMENT REVENUE OBLIGATIONS AND THE EXECUTION OF A FIRST
AMENDMENT TO DEVELOPMENT AGREEMENT RELATING THERETO WITH
DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION, AND PROVIDING
FOR THE PUBLICATION OF NOTICE THEREOF.
Whereas, it is deemed necessary and advisable that the City of Dubuque, Iowa,
should issue Urban~Renewal Tax Increment Revenue obligations, as authorized by
Chapter 403 of the Code of Iowa, and to enter into a First Amendment to Development
Agreement relating thereto with DUBUQUE AREA INDUSTRIAL DEVELOPMENT
CORPORATION, for the purpose of carrying out an Urban Renewal Project as
hereinafter described; and
Whereas, before said obligation may be approved, Section 403.9 of the Code of
Iowa requires that the City Clerk publish a notice of the proposal and of the time and
place of the meeting at which the City Council proposes to take action thereon and at
which meeting the City Council shall receive oral and/or written objections from any
resident or property owner of said City to such proposed action.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
DUBUQUE, IOWA:
Section 1. That the City Council meet in the Auditorium of the Carnegie-Stout Public
Library in Dubuque, Iowa, at 6:30 p.m. on the 19th day of May, 2003, for the purpose of
,taking action on the matter of the issuance of Urban Renewal Tax Increment Revenue
obligations and the execution of a First Amendment to Development Agreement relating
thereto with DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION, the
proceeds of which will be used to carry out certain of the special financing activities
described in the Dubuque Industrial Center Urban Renewal Plan, consisting of the
funding of economic developments grants to DUBUQUE AREA INDUSTRIAL
DEVELOPMENT CORPORATION pursuant to a First Amendment to Development
Agreement entered into with DUBUQUE AREA INDUSTRIAL DEVELOPMENT
CORPORATION under the terms and conditions of said Urban Renewal Plan. It is
expected that the aggregate amount of the Tax Increment Revenue obligations will be
$315,000, more or less, due to assessment increases and/or tax rate adjustments.
Section 2. That the Clerk is hereby directed to cause at least one publication to be
made of a notice of said meeting, in a newspaper, printed wholly in the English
language, published at least once weekly, and having general circulation in said City,
said publication to be not less than four days nor more than twenty days before the date
of said meeting on the issuance of said obligations.
Section 3. That the notice of the proposed action to issue said Obligations shall be in
substantially the form attached hereto.
Passed, approved and adopted this 5th day of May 2003.
Terrance M. Duggan
Mayor
Attest:
Jeanne F. Schneider City Clerk
NOTICE OF A MEETING OF THE CITY COUNCIL OF THE CITY OF DUBUQUE,
IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE OF URBAN RENEWAL
TAX INCREMENT REVENUE OBLIGATIONS AND THE EXECUTION OF A FIRST
AMENDMENT TO DEVELOPMENT AGREEMENT RELATING THERETO WITH
DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION, AND THE
HEARING ON THE ISSUANCE THEREOF.
PUBLIC NOTICE is hereby given that the City Council of the City of Dubuque, Iowa, will
hold a public hearing on the 19th day of May 2003, at 6:30 p.m. in the Carnegie-Stout
Public Library Auditorium, 360 West 11th Street, Dubuque, Iowa, at which meeting the
City Council proposes to take action for the issuance of Urban Renewal Tax Increment
Revenue Obligations and the execution of a First Amendment to Development
Agreement relating thereto with DUBUQUE AREA INDUSTRIAL DEVELOPMENT
CORPORATION, in order to carry out certain of the special financing activities in the
Dubuque Industrial Center Urban Renewal Plan, consisting of the funding of economic
development grants to DUBUQUE AREA INDUSTRIAL DEVELOPMENT
CORPORATION pursuant to a First Amendment to Development Agreement entered
into with DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION under the
terms and conditions of said Urban Renewal Plan. It is expected that the aggregate
amount of the Tax Increment Revenue obligations will be $315,000, more or less, due
to assessment increases and/or tax rate adjustments.
At the meeting, the City Council will receive oral and written objections from any
resident or property owner of said City to the above action. After all objections have
been received and considered, the City Council may at this meeting or at any
adjournment thereof, take additional action for the issuance of such Tax Increment
Revenue Obligations or will abandon the proposal. By order of the City Council said
hearing and appeals therefrom shall be held in accordance with and governed by the
provisions of Section 403.9 of the Code of Iowa.
This notice is given by order of the City Council of the City of Dubuque, Iowa, as
provided by Sections 403.9 of the Code of Iowa.
Dated this __ day of 2003.
Jeanne F. Schneider
City Clerk of Dubuque, Iowa