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Progressive Processing, LLC Third Amendment to Development Agreement_Initiate Copyrighted October 7, 2019 City of Dubuque Items to be set for Public Hearing # 4. ITEM TITLE: Progressive Processing, LLC ThirdAmendmentto Development Agreement SUMMARY: City Manager recommending approval of a Third Amendment to the DevelopmentAgreement between the City of Dubuque and Progressive Processing, LLC to facilitate Progressive Processing's expansion. RESOLUTION of Intent to considera proposed Third Amendment to Development Agreement; fixing the date for a public hearing of the City Council of the City of Dubuque, lowa on the proposed issuance of Urban Renewal Tax Increment Revenue Grant Obligations to Progressive Processing, LLC; and providing for the publication of notice thereof SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Adopt Resolution(s), Set Public Hearing for November 4, 2019 ATTACHMENTS: Description Type Progressi� Processing ThirdAmendmentto City Manager Memo DevelopmentAgreement-MVM Memo Staff Memo Staff Memo 3rdAmendment Supporting Documentation Notice of Hearing Supporting Documentation Resolution Setting Public Hearing Resolutions Dubuque THE CITY OF � uI�AaMca cih DuB E � � I � � I Maste iece on the Mississi i Zoo�•zoiz•zois YP pp zoi�*zoi9 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Third Amendment to Development Agreement between the City of Dubuque and Progressive Processing, LLC DATE: October 2, 2019 Economic Development Director Jill Connors recommends City Council approval of a Third Amendment to the Development Agreement between the City of Dubuque and Progressive Processing, LLC in order to facilitate their expansion, which will create 58 new jobs, 14 of which would qualify for the lowa Economic Development Authority High Quality Jobs Incentive Program. The Third Amendment provides an extension of the Tax Increment Financing rebates in an amount not to exceed $19,863, which will be the required local match for Progressive Processing's application with the lowa Economic Development Authority. I concur with the recommendation and respectfully request Mayor and City Council approval. v Mic ael C. Van Milligen MCVM:jh Attachment cc: Crenna Brumwell, City Attorney Teri Goodmann, Assistant City Manager Cori Burbach, Assistant City Manager Jill M. Connors, Economic Development Director Dubuque Economic Development Department THE CITY OF � so west 13<h street D� L L Alll;EflCijly Dubuque,lowa 52001-4864 1 I I �I Office(563)589-4393 TTY(563)690-6678 http://www.cityofd u b uq ue.org 2007�2012�2013 Masterpiece on the Mississippi zoi�*zoi9 TO: Michael C. Van Milligen, City Manager FROM: Jill M. Connors, Economic Development Director SUBJECT: Resolution Setting a Public Hearing on a Proposed Third Amendment to Development Agreement Between the City of Dubuque and Progressive Processing, LLC providing for the Issuance of Urban Renewal Tax Increment Revenue Grant Obligations Pursuant to the Development Agreement DATE: October 2, 2019 INTRODUCTION This memorandum is a request for the City Council to adopt the attached resolution setting a public hearing for November 4, 2019 on a proposed Third Amendment to Development Agreement Between the City of Dubuque and Progressive Processing, LLC providing for the issuance of Urban Renewal Tax Increment Revenue Grant Obligations. BACKGROUND Progressive Processing, LLC is proposing to expand its Dubuque processing facility to add capacity in its SPAMO production line. Progressive will invest approximately $13 Million in remodeling and machinery/equipment. Progressive is proposing to create 58 newjobs with this expansion, 14 of which would qualify for the IEDA High Quality Jobs Incentive Program. On September 16, 2019 the City Council approved Resolution 342-19 authorizing the City Manager to submit an application to IEDA for business financial assistance. DISCUSSION On September 20, 2019, IEDA committed to an agreement with Progressive for business financial assistance contingent upon a commitment of the required local match. Progressive has also submitted an application to the State of lowa for investment tax credits and a sales tax refund of$575,976. A local match is required and is based upon the expected increase in the company's local property taxes, more specifically, 45°k of the increased property value over five years, which will be $19,863. Providing this funding to the project, thus making the company eligible for the IEDA business financial assistance, will require an amendment to the Development Agreement with the City. An extension of the TIF rebates provided in the Development Agreement, in an amount not to exceed $19,863 is necessary to provide this matching funding. The proposed Third Amendment to Development Agreement provides for city incentives, including Urban Renewal Tax Increment Revenue Grant Obligations, for an additional $19,863 of Tax Increment Finance (TIF) rebates to encourage the development of the property. Additional terms and conditions of the development are included in the attached Third Amendment to Development Agreement. RECOMMENDATION/ ACTION STEP I recommend the City Council adopt the attached resolution setting a November 4, 2019 public hearing on the Development Agreement providing for the issuance of Urban Renewal Tax Increment Revenue Grant Obligations. Prepared by/Return to: Jill Connors, Economic Development. 50 W. 13th Street, Dubuque IA 52001, 563 589-4393 RESOLUTION NO. 358-19 INTENT TO CONSIDER A PROPOSED THIRD AMENDMENT TO DEVELOPMENT AGREEMENT; FIXING THE DATE FOR A PUBLIC HEARING OF THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA ON THE PROPOSED ISSUANCE OF URBAN RENEWAL TAX INCREMENT REVENUE GRANT OBLIGATIONS TO PROGRESSIVE PROCESSING, LLC; AND PROVIDING FOR THE PUBLICATION OF NOTICE THEREOF Whereas, the City of Dubuque, Iowa (City) and Progressive Processing, LLC entered into a Development Agreement (the Development Agreement) dated for reference purposes the 21st day of April, 2008, for a processing operation in Dubuque Industrial Center West in the City of Dubuque which included the issuance of economic development grants (Urban Renewal Tax Increment Revenue Grant Obligations) to Progressive Processing, LLC in connection with the foregoing development; and Whereas, Progressive Processing, LLC intends to expand its processing operation with an additional investment of $13,000,000.00 in machinery and equipment and building improvements to its facility and to create an additional fifty-eight (58) full-time jobs in Dubuque; and Whereas, City has agreed to provide Progressive Processing, LLC additional economic development grants in consideration for the expansion of its processing operation; and Whereas, City and Progressive Processing, LLC now desire to amend the Development Agreement as set forth in the Third Amendment to Development Agreement, a copy of which is now on file at the Office of the City Clerk, City Hall, 50 W. 13th Street, Dubuque, Iowa, providing for the issuance of additional economic development grants (Urban Renewal Tax Increment Revenue Grant Obligations) to Progressive Processing, LLC in connection with the foregoing developments; and WHEREAS, the City Council finds that it is in the best interests of the City to approve the Third Amendment to Development Agreement; and WHEREAS, before the Third Amendment to Development Agreement providing for the issuance of additional Urban Renewal Tax Increment Revenue Grant Obligations may be approved, Chapter 403 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 the City to such proposed action. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. The City Council intends to approve the issuance of additional Urban Renewal Tax Increment Revenue Grant Obligations pursuant to the proposed Third Amendment to Development Agreement. Section 2. The City Clerk is hereby authorized and directed to cause a notice to be published as prescribed by Iowa Code Section 403.9 of a public hearing on the City's intent to authorize additional Urban Renewal Tax Increment Revenue Grant Obligations, to be held on the 4th day of November 2019, at 6:00 o'clock p.m. in the City Council Chambers at the Historic Federal Building, 350 W. 6th St., Dubuque, Iowa. Section 3. That the notice of the proposed action shall be in substantially the form attached hereto. Passed, approved and adopted this 7th day of October, 2019. Attest: Kevin 'Firnstahl, CI y lerk Jake A. Rios, ayor Pro Tem THIRD AMENDMENT TO DEVELOPMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND PROGRESSIVE PROCESSING, LLC This Third Amendment to Development Agreement, dated for reference purposes the_day of , 2019, is made and entered into by the City of Dubuque, lowa, a municipality (City), established pursuant to the lowa Code and acting under authorization of lowa Code Chapter 403, as amended (the Urban Renewal Act), and Progressive Processing, LLC, a Delaware corporation with its principal place of business in Austin, Minnesota (Developer), incorrectly named as Progressive Packaging, LLC in the Development Agreement. WHEREAS, City and Developer previously entered into a Development Agreement dated April 21 , 2008, for its processing facility in the City of Dubuque (the Development Agreement), as amended; and WHEREAS, Developer has proposed to expand its processing facility and has agreed to an additional investment of approximately $13 Million in building improvements, construction and machinery/equipment and to create 58 additional new jobs with this expansion, WHEREAS, City and Developer desire to further amend the Development Agreement as set forth herein. NOW THEREFORE, IN CONSIDERATION OF THE MUTUAL TERMS AND COVENANTS CONTAINED HEREIN, CITY AND DEVELOPER AGREE AS FOLLOWS: Section 1 . Section 2.1 of the Development Agreement is hereby amended to read as follows: 2.1 Required Minimum Improvements. (1) City acknowledges that Developer is building a manufacturing facility on the Property, specifically, a building and certain internal systems thereto, and including, without limitation, all interior improvements (the Original Minimum Improvements), all as more particularly depicted and described on the plans and specifications to be delivered to and approved by City as contemplated in this Agreement. Developer hereby agrees that the Original Minimum Improvements shall include a manufacturing facility with approximately three hundred twenty- seven thousand (327,000) square feet of floor space, along with necessary site 100219ba1 work and equipment as contemplated in this Agreement, at an estimated cost of approximately $89,000,000. (2) Developer agrees to make additional Minimum Improvements of $34,400,000.00 in machinery and building improvements (the Additional Minimum Improvements). (3) Developer agrees to make subsequent Minimum Improvements of $13,000,000.00 in machinery and building improvements (the Subsequent Minimum Improvements). (4) The Original Minimum Improvements, the Additional Minimum Improvements, and the Subsequent Minimum Improvements are referred to herein collectively as the Minimum Improvements. Section 2. Section 2.3 of the Development Agreement is hereby amended to read as follows: 2.3 Timing of Improvements. (1) Developer hereby agrees that construction of the Original Minimum Improvements on the Property shall be commenced within three (3) months after the Closing Date, and shall be substantially completed by December 31 , 2009. For purposes of this section, "substantial completion" shall mean completion of the site work and completion of the core and shell of the building, but shall not include fixtures and equipment, and does not contemplate receipt of a certificate of occupancy. (2) The Additional Minimum Improvements shall be substantially completed by June 1 , 2018. (3) The Subsequent Minimum Improvements shall be substantially completed by July 1 , 2020. (4) The time frames for the pertormance of these obligations shall be suspended due to unavoidable delays, meaning delays, outside the control of the party claiming its occurrence in good faith, which are the direct result of strikes, other labor troubles, unusual shortages of materials or labor, unusually severe or prolonged bad weather, acts of God, fire or other casualty to the Minimum Improvements, litigation commenced by third parties which, by injunction or other similar judicial action or by the exercise of reasonable discretion directly results in delays, or acts of any federal, state or local government which directly result in delays. The time for performance of such obligations shall be extended only for the period of such delay. Section 3. Section 3.2(1) of the Development Agreement is hereby amended to 2 read as follows: (1) For and in consideration of Developer's obligations hereunder, and in furtherance of the goals and objectives of the Urban Renewal Plan for the Project Area and the Urban Renewal Law, City agrees, subject to Developer being in compliance with the terms of this Agreement as follows: (a) To make twenty (20) consecutive semi-annual payments (such payments being referred to collectively as the Economic Development Grants) to Developer if Developer owns or leases the Property and/or the Minimum Improvements thereon during the period such tax increment revenues accrue, as follows: November 1 , 2011 May 1 , 2012 November 1 , 2012 May 1 , 2013 November 1 , 2013 May 1 , 2014 November 1 , 2014 May 1 , 2015 November 1 , 2015 May 1 , 2016 November 1 , 2016 May 1 , 2017 November 1 , 2017 May 1 , 2018 November 1 , 2018 May 1 , 2019 November 1 , 2019 May 1 , 2020 November 1 , 2020 May 1 , 2021 The foregoing Economic Development Grants will be made pursuant to lowa Code Section 403.9 of the Urban Renewal Law in amounts equal to the actual amount of tax increment revenues collected by City under lowa Code Section 403.19 (without regard to any averaging that may otherwise be utilized under lowa Code Section 403.19 and excluding any interest that may accrue thereon prior to payment to Developer) during the preceding six-month period in respect of the Property and Minimum Improvements constructed by Developer (the Developer Tax Increments). (b) To make ten (10) consecutive semi-annual payments (such payments being referred to collectively as the Economic Development Grants) to Developer if Developer owns or leases the Property and/or the Minimum Improvements thereon during the period such tax increment revenues accrue, as follows: November 1 , 2021 May 1 , 2022 November 1 , 2022 May 1 , 2023 November 1 , 2023 May 1 , 2024 November 1 , 2024 May 1 , 2025 November 1 , 2025 May 1 , 2026 The foregoing Economic Development Grants will be made pursuant to 3 lowa Code Section 403.9 of the Urban Renewal Law in amounts equal to forty percent (40°k) of the actual amount of tax increment revenues collected by City under lowa Code Section 403.19 (without regard to any averaging that may otherwise be utilized under lowa Code Section 403.19 and excluding any interest that may accrue thereon prior to payment to Developer) during the preceding six-month period in respect of the Property and Minimum Improvements constructed by Developer (the Developer Tax Increments). (c) To make additional consecutive semi-annual payments on November 1 and on May 1 of subsequent years following the May 1 , 2026 payment (such payments being referred to collectively as the Subsequent Economic Development Grants) to Developer if Developer owns or leases the Property and/or the Minimum Improvements thereon during the period such tax increment revenues accrue, until the additional payments are equal to but do not exceed $19,863.00. The foregoing Subsequent Economic Development Grants will be made pursuant to lowa Code Section 403.9 of the Urban Renewal Law in amounts equal to one hundred percent (100°k) of the actual amount of tax increment revenues collected by City under lowa Code Section 403.19 (without regard to any averaging that may otherwise be utilized under lowa Code Section 403.19 and excluding any interest that may accrue thereon prior to payment to Developer) during the preceding six-month period in respect of the Property and Minimum Improvements constructed by Developer (the Developer Tax Increments). Developer recognizes and agrees that the Economic Development Grants shall be paid solely and only from the incremental taxes collected by City in respect to the Property and Minimum Improvements, which does not include property taxes collected for the payment of bonds and interest of each taxing district, and taxes for the regular and voter-approved physical plant and equipment levy, and any other portion required to be excluded by lowa law, and thus such incremental taxes will not include all amounts paid by Developer as regular property taxes. Section 4. Section 4.1 of the Development Agreement is hereby amended to read as follows: 4.1 Job Creation. (1) Developer agreed to create one hundred and ninety-six (196) full- time jobs in Dubuque, lowa prior to January 1 , 2011 , and maintain those jobs during the Term of this Agreement. It is agreed by the parties that Developer had eight (8) full time positions in Dubuque, lowa as of March 1 , 2008. City agrees this requirement has been met. 4 Developer also agreed to create an additional ninety-one (91) full-time jobs in Dubuque, lowa, prior to June 1 , 2018. City agrees this requirement has been met. Developer agrees to create an additional fifty-eight (58) full-time jobs in Dubuque, lowa prior to January 1 , 2021 , and shall maintain those 58 jobs during the term of this Agreement. Developer agrees that the total of 353 full-time jobs agreed to in the Agreement, as amended, shall be maintained during the term of this Agreement. In the event that the certificate provided to City under Section 4.2 hereof on January 1 , 2026 discloses that Developer does not as of that date have at least 353 employees as provided hereinabove, then Developer shall pay to City, promptly upon written demand therefore, an amount equal to $ 8,402.97 per job not created or maintained ($2,966,250.00 divided by 353 jobs = $ 8,402.97). The payments provided for herein shall be City's sole remedy for the failure of Developer to meet the job creation requirements of this Section 4.1(1). (2) City retains the right to begin escrowing amounts in anticipation of Developer's obligation to refund a portion of the Acquisition Grant under subsection 4.1 (1) above by withholding a portion of the semi-annual Economic Development Grant payable under Section 4.1 (1) of this Agreement beginning February 1 , 2025 if the certificate provided to City under Section 4.2 hereof on January 1 , 2025 discloses that Developer as of that date has not created and maintained, as of the date of such certificate, the FTE employees required by Section 4.1 (1). City shall not withhold any amount in excess of the amount calculated in Section 4.1(1). In the event that the certificate provided to City under Section 4.2 hereof on the FTE Date discloses that Developer does have, as of the FTE Date, at least the required FTE employees as provided in subsection 4.1 (1) of this Agreement, City shall release to Developer the amount of the Economic Development Grants withheld under this subsection 4.1 (2) of this Agreement. (3) In addition, for the positions that Developer fails to create and maintain: (a) For any year from 2018 to and including 2021 , the semi- annual Economic Development Grants for such year under Section 3.2 shall be reduced by the percentage that the number of such positions bearsto the total number of positions required to be created and maintained (292 jobs) by this Section 4.1 . (For example, if Developer has 250 jobs, the semi-annual Economic Development Grants would be 85.62°k (250/292 employees) of the available Developer Tax Increment received by City). The reduction of the 5 semi-annual Economic Development Grants shall be City's sole remedy for the failure of Developer to meet the job creation requirements of Section 4.1 (1) for such years. (b) For any year from 2022 to and including 2026, the semi- annual Economic Development Grants for such year under Section 3.2 shall be reduced by the percentage that the number of such positions bearsto the total number of positions required to be created and maintained (353 jobs) by this Section 4.1 times forty percent (40°k). (For example, if Developer has 300 jobs, the semi-annual Economic Development Grants would be 85°k (300/353 employees) x 40°k of the available Developer Tax Increment received by City). The reduction of the semi-annual Economic Development Grants shall be City's sole remedy for the failure of Developer to meet the job creation requirements of Section 4.1 (1) for such years. Section 5. Section 6.3 is amended to read as follows: 6.3. Termination Date. This Agreement and the rights and obligations of the parties hereunder shall terminate on the day after the last payment required by Section 3.1 (2)(c). Section 6. Except as modified herein, the Development Agreement shall remain in full force and effect. CITY OF DUBUQUE, IOWA PROGRESSIVE PROCESSING, LLC By: By: Roy D. Buol, Mayor Gary Jamison, VP & Treasurer F:\Users\Laserfche Legal\Hormel Foods-Progressive Packaging\Third AmendmentToDA_100219.docx 6 NOTICE OF A PUBLIC HEARING OF THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA ON THE APPROVAL OF A THIRD AMENDMENT TO DEVELOPMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND PROGRESSIVE PROCESSING, LLC. PROVIDING FOR THE ISSUANCE OF ADDITIONAL URBAN RENEWAL TAX INCREMENT REVENUE GRANT OBLIGATIONS PURSUANT TO THE DEVELOPMENT AGREEMENT PUBLIC NOTICE is hereby given that the City Council of the City of Dubuque, lowa, will hold a public hearing on the 4�h day of November, 2019, at 6:00 p.m. in the City Council Chambers at the Historic Federal Building, 350 W. 6th St., Dubuque, lowa, at which meeting the City Council proposes to take action to approve a Third Amendment to Development Agreement between City and Progressive Processing, LLC, a copy of which is now on file at the Office of the City Clerk, City Hall, 50 W. 13�h Street, Dubuque, lowa, providing for the issuance of additional economic development grants (Urban Renewal Tax Increment Revenue Grant Obligations) described therein in order to carry out the purposes and objectives of the Urban Renewal Plan for the Dubuque Industrial Center Economic Development District, consisting of the funding of economic development grants for Progressive Processing, LLC, under the terms and conditions of the Urban Renewal Plan for the Dubuque Industrial Center Economic Development District. The additional amount of the Urban Renewal Tax Increment Revenue Grant Obligations shall not exceed $19,863. 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, authorize such issuance of the additional Urban Renewal Tax Increment Revenue Grant Obligations or 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 lowa. This notice is given by order of the City Council of the City of Dubuque, lowa, as provided by Chapter 403 of the Code of lowa. Dated this 7�h day of October 2019. Kevin S. Firnstahl City Clerk of Dubuque, lowa