DAIDC 2nd Amend Devel Agree
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MEMORANDUM
August 31, 2004
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Second Amendment to Development Agreement with Dubuque Area
Industrial Development Corporation
Economic Development Director Bill Baum recommends City Council approval of a
Second Amendment to the Development Agreement with Dubuque Area Industrial
Development Corporation (DAIDC), which allows the current Tax Increment Financing
benefits accruing to DAIDC to be assigned to its successors or assigns (in this case,
Walter Development, LLC), subject to the new owner maintaining a base employment of
15 full time equivalent jobs at the facility.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
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Miéhael c. Van Milligen
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Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
William Baum, Economic Development Director
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CITY OF DUBUQUE, IOWA
MEMORANDUM
August 27, 2004
FROM:
Michael Van Milligen, City Manager
William Baum, Economic Development Director ~/¿.!~
TO:
SUBJECT: Second Amendment to Development Agreement with Dubuque Area
Industrial Development Corporation
INTRODUCTION
This memorandum presents for City Council review and approval a Resolution
authorizing the execution of a Second Amendment to the Development Agreement with
Dubuque Area Industrial Development Corporation (DAIDC). A letter from Rick
Dickinson, on behalf of DAIDC, is attached.
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.
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.
A local import/export company, DDI, is currently leasing a portion of the building.
In May, 2003, the City Council approved a First Amendment to the Development
Agreement 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.
Section 5. of the First Amendment provides that the annual TI F reimbursement would
apply only to DAIDC as owner of the property,
DISCUSSION
Attached is a letter from Rick Dickinson, Director of the Dubuque Area Industrial
Development Corporation. DAIDC has an Offer to Purchase the spec building from
Walter Development, LLC, The Offer is contingent upon the DAIDC providing the buyer
with adequate assurances that the tax increment benefits will be retained for the
remainder of the term of the TIF (9 years).
A letter from Tim Hodge, President of Walter Development, LLC to Mr. Dickinson is also
enclosed. Mr. Hodge states that the decision to purchase the spec building was made
because of "our ability to market the TIF savings to potential lessees." He also states
"the only way the purchase and further development of this property made financial
sense was with the TIF savings,"
The inability to transfer the Tax Increment Financing benefits to Walter Development
could stop the sale of the Spec Building.
Therefore, I have prepared a Second Amendment to the Development Agreement with
DAIDC for City Council consideration, This amendment allows the transfer of the TIF
benefits to a new owner, but requires any new owner to maintain base employment of
15 full time equivalent jobs at the facility in order to receive the annual tax increment
rebate, The TIF benefits are limited to the incremental taxes on the current property
improvements, Any new development on the property by Walter Development that
increases the assessable value would not, under the current Development Agreement
or amendments, receive TIF reimbursement.
RECOMMENDATION
I recommend that the City Council adopt the attached Resolution authorizing execution
of the Second Amendment that allows the current TIF benefits accruing to DAIDC to be
assigned to its successors or assigns (in this case, Walter Development, LLC) subject
to meeting certain employment obligations.
ACTION STEP
The action step for the City Council is to adopt the attached Resolution,
attachments
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DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION
300 Main Street, Suite 120
Dubuque, Iowa 52001
Phone: 563-557-9049
Fax: 563-557-1059
August 4, 2004
Mr. Bill Baum
Economic Development Director
City of Dubuque
50 W. 13th Street
Dubuque, Iowa 52001
Dear Bill:
I am writing to request that the Development Agreement between the City of Dubuque and Dubuque Area
Industrial Development Corporation (DAIDC) be amended to facilitate the sale ofDAIDC's Spec
Building located at 7425 Chavenelle Road, Specifically, we ask that the "First Amendment to
Development Agreement" be amended by striking paragraph 5 and providing that the balance ofthe
annual TIF rebate be provided to a successorlbuyer,
In 1999, with the encouragement and support of the City of Dubuque and at significant risk and great
expense, DAIDC boldly financed the first spec building to be constructed in Dubuque in nearly two
decades. Our dual purpose was to provide a showplace for the City's new Dubuque Industrial Center
West and provide a marketable spec building for the Greater Dubuque area.
Thanks in part to that investment, there are now five occupants in the Dubuque Industrial Center and on
April 1,2003, DOl, International, Inc. leased 18,200 sq. ft of the original 43,200 sq. ft spec building.
DOl, Inc. is a hometown start up, import and distribution firm that has grown to 26 employees. They
have expanded their operation since 2003 and are currently leasing 28,200 sq, ft, leaving 15,000 sq, ft. of
warehousing space vacant.
On July 27, 2004, the Dubuque Area Industrial Development Corporation Board of Directors voted to
accept an offer to purchase the spec building from Walter Development, LLC. for a purchase price of
$1,388,000.00 conditional upon an assurance that they would retain the current TIF benefits for the
remainder of the terms (to-wit: nine (9) years,), A close on the spec building is scheduled for
November I, 2004 if all conditions are met.
No one can question the need for an available spec building as a necessary component of any successful
economic development strategy. But it comes at a cost and that is why we request that the Economic
Development grant be provided to the successorlbuyer of the property located at 7425 Chavenelle Road.
Failure to do so will result in continued depletion ofDAIDC assets and the compromising of our agencies
ability to develop the next spec manufacturing facility. We appreciate your favorable consideration of our
request and are available to answer any questions regarding this request.
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Rick Dickinson
Director
Enclosures
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July 30, 2004
Rick Dickinson
Greater Dubuque Development Corporation
770 Town Clock Plaza
Dubuque IA 52001
Dear Rick,
In reference to our conversation on July 29. Our decision to purchase the DAIDC spec
building was made, in large part, because of our ability to market the TIF savings to
potential lessees. In fact, we have given proposals to companies with the TIF savings
included. Our offer and acceptance document specifically stated inclusion of the
remaining 9 years ofTIF as a contingency of purchase, which DAIDC represented as
being satisfied.
Additionally, we are engaged in a 1031 exchange with a recently sold property for which
we identified the DAIDC spec building as the replacement property. Our deadline to add
properties to this list passed on July 26, therefore we must apply proceeds to the spec
building in order to complete the 1031 exchange.
Our due diligence and market study led us to conclude that the only way the purchase and
further development of this property made fiscal sense was with the TIF savings for the
initial building for the next 9 years. We appreciate your attention to this matter and please
let us know if there is anything else we can provide.
Respectfully,
Walter Development, LLC
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President
RESOLUTION NO. 338-04
AUTHORIZING THE EXECUTION OF A SECOND AMENDMENT TO DEVELOPMENT
AGREEMENT WITH DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION.
Whereas, the City Council of the City of Dubuque, Iowa, after public hearing, duly
adopted an Urban Renewal Plan (the Plan) for the Dubuque Industrial Center Economic
Development 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 with Section 15A.1 of the
Iowa Code, that DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION and
subsequent owners of the property are qualified to receive such loan or grant assistance
subject to certain employment obligations; and
Whereas, a Second Amendment to Development Agreement, hereto attached and
by this reference made a part hereof, sets forth the terms and conditions of the
disbursement of Economic Development Grants to the DUBUQUE AREA INDUSTRIAL
DEVELOPMENT CORPORATION or to its successors or assigns.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
DUBUQUE, IOWA:
Section 1. That the Second Amendment to Development Agreement by and between
the City of Dubuque and DUBUQUE AREA INDUSTRIAL DEVELOPMENT
CORPORATION, attached hereto, is hereby approved.
Section 2. That the Mayor and City Clerk are hereby authorized and directed to
execute, on behalf of the City of Dubuque, Iowa, said Second Amendment to Development
Agreement.
Passed, approved and adopted this 7th day of September 2004.
Terrance M. Duggan, Mayor
Attest:
Jeanne F. Schneider, City Clerk
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SECOND AMENDMENT
TO
DEVELOPMENT AGREEMENT
THIS SECOND AMENDMENT TO DEVELOPMENT AGREEMENT (the "Amendment"), made
and executed as of this - day of , 2004, by and between the CITY OF
DUBUQUE, IOWA, a municipality (the "City"), acting under authorization of Chapter 403 of the Code
of Iowa, as amended (the "Urban Renewal Act") and DUBUQUE AREA INDUSTRIAL
DEVELOPMENT CORPORATION, an Iowa nonprofit corporation with its principal place of business
in Dubuque, Iowa (Developer),
WITNESSETH:
WHEREAS, the above-identified parties have executed a certain Development Agreement
dated October 25, 1999 pertaining to, inter alia, the purchase, sale, development and use of certain
real property located in the City of Dubuque, County of Dubuque, State of Iowa (the "Property") which
is more fully described as:
Lot 1 Dubuque Industrial Center West in the City of Dubuque; and
WHEREAS, the "Property", which is located in the Dubuque Industrial Center Economic
Development District (the "District"), has been so designated by City Council Resolution 478-
97 as an Economic Development Area (the "Project Area") as defined by the Urban Renewal
Law; and
WHEREAS, the Developer has constructed a 40,000 square foot speculative industrial
building at a cost of not less than Nine Hundred Thousand Dollars ($900,000) (the "Minimum
Improvements") on the Property for purposes of promoting and marketing economic
development opportunities in the City of Dubuque; and
WHEREAS, pursuant to Section 403.6(1) of the Iowa Code, and in conformance with
the Amended and Restated Urban Renewal Plan for the Project Area adopted on November
17,1997, the City has the authority to enter into contracts and agreements to implement the
Urban Renewal Plan; and
WHEREAS, the above referenced parties have executed a First Amendment to the
Development Agreement, providing the benefits of Tax Increment Financing to assist in
creating jobs in the Project Area;
NOW, THEREFORE, in consideration of the Development Agreement and First Amendment
thereto, the foregoing recitals, the mutual covenants, terms and conditions hereinafter set forth and
other valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the City
and the Developer do hereby agree to modify, amend and supplement the Development Agreement
together with the First Amendment, as follows:
1, Section 5. of the First Amendment to the Development Agreement is hereby amended to read:
5. The Economic Development Grants described herein shall be paid to the
Developer or to its successors or assigns, but payments shall not be made to
successors or assigns without the prior written consent of City.
2, Employment. It is agreed by the parties that the Developer through its Lessees maintains
a base employment in Dubuque, Iowa, of at least fifteen (15) existing full time equivalent
jobs as of August 1, 2004. In the event that any certificate provided to City under Section
3, hereof discloses that the Developer, through its own employment of the employment of
its Lessees, its successors or assigns have not maintained at least fifteen (15) FTE
employees as provided hereinabove, Developer or any of its successors or assigns will not
receive payments described in Section 1. of the First Amendment to the Development
Agreement.
3. Certification. To assist City in monitoring the performance of Developer, its successors or
assigns hereunder, Developer, successors or assigns shall certify to City the number offull
time equivalent jobs employed at Property on December 31 of each year. Such certificate
shall be provided not later than February 1 of the year following the December 31
Certification date, This Certification will be initially provided no later than February 1,2005
for the December 31,2004 employment at the Property,
4. The parties hereby ratify and reaffirm all terms and conditions of the Development
Agreement and First Amendment thereto which are not expressly modified, amended or
supplemented herein and acknowledge and agree that the Development Agreement, and
First Amendment as modified, amended and supplemented hereby, shall be and hereby is
reinstated and shall continue in full force and effect for the duration and the extent therein
provided.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
Development Agreement to be executed by their respective duly authorized officers or
representatives as of the date and year first above written.
CITY OF DUBUQUE, IOWA
by:
Terrance M. Duggan, Mayor
by:
Jeanne F. Schneider, City Clerk
DUBUQUE AREA INDUSTRIAL DEVELOPMENT CORPORATION
by:
Jeffrey Bullock, President
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