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Heartland Financial USA TIFMEMORANDUM April 28, 2003 TO:The Honorable Mayor and City Council Members FROM:Michael C. Van Milligen, City Manager SUBJECT:Tax Increment Financing for Heartland Financial USA, Inc. On January 7, 2002, the City Council approved a Memorandum of Understanding (MOU) with Heartland Financial USA, Inc. regarding certain public financial incentives that would be available to the company in consideration of their not less than $4 million investment in property located in the 1300 block between Central Avenue and Iowa Street (the former Walsh Store property). The company committed to creating 45 new jobs by December 31, 2008. The MOU provided that the City would support the project by approving the use of tax increment proceeds to make reimbursement to the company of the actual new increment of property taxes that Heartland Financial will pay over a ten year period. At this time, the new taxes over the ten year period are expected to be approximately $478,000. Economic Development Director Bill Baum recommends City Council approval of the issuance of tax increment revenue obligations for Heartland Financial USA, Inc., and that a public hearing be set for May 19, 2003. 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 Heartland Financial USA, Inc. 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 Heartland Financial USA, Inc. The public hearing would be held on May 19, 2003. BACKGROUND On January 7, 2002, the City Council approved a Memorandum of Understanding (MOU) with Heartland Financial USA, Inc. regarding certain public financial incentives that would be available to the company in consideration of their not less than $4 million investment in property located in the 1300 block between Central Avenue and Iowa Street (the former Walsh Store property). The company committed to creating 45 new jobs by December 31, 2008. In April 2002, the City expanded the Downtown Dubuque Urban Renewal District to allow the use of tax increment financing for this project. The City has also supported the project with CDBG funding, Enterprise Zone project approval and has committed future Downtown Rehabilitation Loan program funds when they become available. DISCUSSION The MOU provided that the City would support the project by approving the use of tax increment proceeds to make reimbursement to the company of the actual new increment of property taxes that Heartland Financial will pay over a ten (10) year period. At this time, the new taxes are estimated to be $47,800 per year; however, that amount could increase based on the actual amount of property taxes paid each year by the company due to assessment increases and/or tax rate adjustments. It is also not clear yet what impacts legislation being considered by the Iowa Legislature may have on these resources. The total reimbursement from tax increment revenues over the ten (10) year period is expected to be approximately $478,000. It is proposed that following the public hearing, the City Council would enter into a Development Agreement (attached for your review) with the company that sets forth the terms for reimbursement of the TIF revenues generated from the Heartland Financial project. Should the job creation goals not be met in any given year, the TIF tax rebate would be reduced on a per/job basis. 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 the relocation and expansion of Heartland Financial USA, Inc. ACTION STEP The action step for the City Council is to adopt the attached Resolution. attachments F:\USERS/Pmyhre\WPDOCS/LOANDOC/HeartlandFinanciaI\TIF.MEM.doc RESOLUTION NO. 144-03 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 DEVELOPMENT AGREEMENT RELATING THERETO WITH HEARTLAND FINANCIAL USA, INC., 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 Development Agreement relating thereto with HEARTLAND FINANCIAL USA, INC., 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 wdtten 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 Development Agreement relating thereto with HEARTLAND FINANCIAL USA, INC., the proceeds of which will be used to carry out certain of the special financing activities described in the Downtown Dubuque Urban Renewal Plan, consisting of the funding of economic developments grants to HEARTLAND FINANCIAL USA, INC. pursuant to a Development Agreement entered into with HEARTLAND FINANCIAL USA, INC. 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 $478,000, 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 cimulation 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 DEVELOPMENT AGREEMENT RELATING THERETO WITH HEARTLAND FINANCIAL USA, INC., 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 Development Agreement relating thereto with HEARTLAND FINANCIAL USA, INC., in order to carry out certain of the special financing activities in the Downtown Dubuque Urban Renewal Plan, consisting of the funding of economic development grants to HEARTLAND FINANCIAL USA, INC. pursuant to a Development Agreement entered into with HEARTLAND FINANCIAL USA, INC. 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 $478,000, 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 DEVELOPMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND HEARTLAND FINANCIAL USA, INC. THIS DEVELOPMENT AGREEMENT dated this day of 2003 by and between the City of Dubuque, Iowa (the "City"), and HEARTLAND FINANCIAL USA, INC. (the "Developer"). WITNESSETH: WHEREAS, the Developer and the City have entered into a Memorandum of Understanding, approved by the City Council of Dubuque, Iowa on January 7, 2002, which Memorandum of Understanding provides that the Developer will make a capital investment of not less than $4 Million in building improvements, equipment, furniture and fixtures, ("the Minimum Improvements"), and employ not less than twenty (20) new full time equivalent jobs within two (2) years and not less than forty-five (45) jobs within five (5) years at Developer's facility in Dubuque, Iowa; and WHEREAS, the Developer's facility is located on the real property, the legal description of which is N1/5-CL 449, Nl/2-NMl/5-CL449, S1/2-NMI/5-CL 449, MI/5-CL 449,S2/5-CL 449, N.25'5"-M1/5-CL 456, L4-S2/5-CL 456, L1-L3-S1/2-CL 456, L2-L3-S1/2-CL 456, L2- S1/2-CL 456, L1-S1/2-CL 456 Original Town in the City of Dubuque, Iowa, Dubuque County, Iowa (the "Property"), which is located in the Downtown Dubuque Urban Renewal District (the "District") which has been so designated by City Council Resolution 187-02 as an urban renewal area (the "Project Area~) defined by Chapter 403 of the Iowa Code (the "Urban Renewal Law"); and WHEREAS, the Developer has undertaken the redevelopment of a commercial/office building located on the Property and will operating the same during the term of this Agreement; and WHEREAS, pursuant to Section 403.6(1) of the Iowa Code, and in conformance with the Urban Renewal Plan for the Project Area adopted on April 1, 2002, the City has the authority to enter into contracts and agreements to implement the Urban Renewal Plan. NOW, THEREFORE, the parties to this Development Agreement, in consideration of the promises, covenants and agreements made by each other, do hereby agree as follows: 1. The substantial completion of the Minimum Improvements by the Developer will occur on or before December 31, 2003. 2. The Developer agrees to operate the Minimum Improvements until at least the termination of this Agreement. 3. The Developer agrees to maintain its existing (May 16, 2002) employment of two hundred fifty-five (255) full time equivalent positions in Dubuque, Iowa, at all times until the termination of this Agreement, and to create or cause to be created not less than forty-five (45) new full time equivalent (1820 hours per year) jobs by no later than December 31, 2008. It is agreed by the parties that the new jobs created shall be calculated by subtracting the existing employment (255) from the Developer's actual total employment in Dubuque, Iowa on December 31, 2008, and annually on December 31 of each year thereafter until termination of this Agreement. The Developer agrees to maintain not less than a total of 300 full time equivalent positions from December 31, 2008 until the termination of this Agreement. 4. To assist the City in monitoring the requirements of Section 3, Developer, on February 1, 2009, and annually on February 1 of each year thereafter until the termination of this Agreement, a duly authorized officer of the Developer shall certify to the City (a) the number of full time equivalent jobs employed at the Property on such date, and (b) that as of the date of such certificate, the Developer is not in default (or is in default) in the fulfillment of the terms and conditions of this Agreement. The Developer shall attach to the certification a copy of the Developer's December 31 Quarterly State of Iowa "Employer's Contribution and Payroll Report. 5. In the event that any certificate provided to the City discloses that the Developer has not created at least forty-five (45) new FTE employees as provided in Section 3, the Developer shall pay to the City, promptly upon written demand therefore, an amount equal to $1,062 for each job less than forty-five (45), or the City, at its sole discretion, may deduct said amount from the annual Economic Development Grant paid to the Developer according to Section 6. 6. For and in consideration of the obligations being assumed by the Developer hereunder, and in furtherance of the goals and objectives of the Urban Renewal Plan for the Project Area and the Urban Renewal Law, the City agrees, subject to the Developer being and remaining in compliance with the terms of this Agreement, to make up to ten (10) consecutive annual payments (such payments being referred to collectively as the "Economic Development Grants") to the Developer, pursuant to Section 403.9 of the Urban Renewal Law, in amounts equal to the actual amount of tax increment revenues collected by the City (without regard to any averaging that may otherwise be utilized under Section 403.19 and excluding any interest that may accrue thereon prior to payment to the Developer) during the preceding twelve-month period in respect of the Minimum Improvements constructed by the Developer (the "Developer Tax Increments"). 7. To fund the Economic Development Grants, the City shall certify to Dubuque County prior to December 1 of each year, commencing December 1, 2004, its request for the available Developer Tax Increments resulting from the assessments imposed by the County on the Minimum Improvements as of January 1 of that year, to be collected by the City as taxes are paid during the following fiscal year and which shall thereafter be disbursed to the Developer on June 1 of that fiscal year. (Example: If the City so certifies in December, 2004, the Economic Development Grant in respect thereof would be paid to the Developer on June 1, 2006). 8. The Economic Development Grants shall be payable from and secured solely and only by the Developer Tax Increments, which, upon receipt, shall be deposited and held in a special account created for such purpose and designated as the "Heartland Financial TIF Tax Increment Financing Account" of the City. The City hereby covenants and agrees to maintain its TIF ordinance in force during the term hereof and to apply the incremental taxes collected in respect of the Minimum Improvements and allocated to the Heartland Financial TIF Account to pay the Economic Development Grants, as and to the extent set forth in Section 6 hereof. The Economic Development Grants shall not be payable in any manner by other tax increment revenues or by general taxation or from any other City funds. The City makes no representation with respect to the amounts that may be paid to the Developer as the Economic Development Grants in any one year, and under no circumstances shall the City in any manner be liable to the Developer so long as the City timely applies the Developer Tax Increments actually collected and held in the Heartland Financial TIF Account (regardless of the amounts thereof) to the payment of the Economic Development Grants to the Developer as and to the extent described in this Section. 9. The City shall be free to use any and all tax increment revenues collected in respect of other properties within the Project Area, or any available Developer Tax Increments resulting from the termination of the annual Economic Development Grants under Section 6 hereof, for any purpose for which such tax increment revenues may lawfully be used pursuant to the provisions of the Urban Renewal Law, and the City shall have no obligations to the Developer with respect to the use thereof. 10. Neither the preambles nor provisions of this Agreement are intended to modify, nor shall they be construed as modifying, the terms of any other contract between the City and the Developer. 11. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. CITY OF DUBUQUE, IOWA By Terrance M. Duggan Mayor Attest: Jeanne F. Schneider City Clerk Heartland Financial USA, INC. By Lynn B. Fuller Chairman and CEO (City Seal) STATE OF IOWA ) ) SS: COUNTY OF DUBUQUE ) On this __ day of 2003, before me the undersigned, a Notary Public in and for the said County and State, personally appeared Terrance M. Duggan and Jeanne F. Schneider, to me personally known, who, being by me duly sworn, did say that they are the Mayor and City Clerk, respectively, of the City of Dubuque, Iowa, a municipal corporation executing the instrument to which this is attached; that the seal affixed hereto is the seal of said municipal corporation; that said instrument was signed and sealed on behalf of the City of Dubuque, Iowa, by authority of its City Council; and that said Mayor and City Clerk acknowledged the execution of said instrument to be the voluntary act and deed of said City, by it and by them voluntarily executed. Notary Public STATE OF IOWA ) ) SS: COUNTY OF DUBUQUE ) On this __ day of 2003, before me the undersigned, a Notary Public in and for the State of Iowa, personally appeared Lynn B. Fuller, to me personally known, who, being by me duly sworn, did say that he is the Chairman and CEO of HEARTLAND FINANCIAL USA, INC., the corporation executing the instrument to which this is attached and that as said Chairman and CEO of HEARTLAND FINANCIAL USA, INC. acknowledges the execution of said instrument to be the voluntary act and deed of said company, by it and by him, an individual, voluntarily executed. Notary Public RESOLUTION NO. AUTHORIZING THE EXECUTION OF A DEVELOPMENT AGREEMENT WITH HEARTLAND FINANCIAL USA, INC. Whereas, the City Council of the City of Dubuque, Iowa, after public hearing, duly adopted an Urban Renewal Plan (the Plan) for the Downtown Dubuque Urban Renewal District (the District); and Whereas, the Plan provides that the City may undertake special financing activities, including loans or grants to private developers, to meet the objectives of the Plan and to encourage the development of the District; and Whereas, the City Council has determined, in accordance ~th Section 15A. 1 of the Iowa Code, that HEARTLAND FINANCIAL USA, INC. is quali~fed to receive such loan or grant assistance to assist with the relocation and expansion of its facility in the District; and Whereas, pursuant to published notice, the CityCouncil has held a public hearing on the proposition of obligating Tax Increment Revenue to assist HEARTLAND FINANCIAL USA, INC., and has considered and overruled any and all objections thereto; and Whereas, it is expected that the aggregate amount of the Tax Increment Revenue obligations will be $478,000, more or less, due to assessment increases and/or taxrate adjustments; and Whereas, a Development Agreement, attached hereto and bythis reference made a part hereof, sets forth the terms and conditions ofthe disbursement of Tax Increment Revenue proceeds to HEARTLAND FINANCIAL USA, iNC. NOW, THEREFORE, BE IT RESOLVED BYTHE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the form of Development Agreement by and between the City of Dubuque and Heartland Financial USA, inc., attached hereto, is herebyapproved. Section 2. That the Mayor and City Clerk are hereby authorized and directed to execute, on behalf of the City of Dubuque, Iowa, said Development Agreement. Passed, approved and adopted this 19th day of May 2003. Attest: Terrance M Duggan Mayor Jeanne F, Schneider City Clerk F:\USERS\Pm~hre\WPDOCS~LOANDOC~HeartlandFinancial\TIFhearfland.doc