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Eagle Window & Door Expansion $CITY OF DUBUQUE, IOWA MEMORANDUM February 11, 2000 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: On December 7, 1999, the City Council authorized the issuance of $3,168,538 in Tax Increment Financing Revenue Bonds to support the Eagle Window and Door expansion. Due to delays in the project and some modifications to the terms, a reapproval of the bonds is being recommended by Community & Economic Development Director Jim Burke. I concur with the recommendation at respectfully request Mayor and City Council approval. Michael C. Van Milligen City Manager MCVM/ksf Attachment cc: Barry Lindahl, Corporation Counsel Tim Moerman, Assistant City Manager Jim Burke, Community & Economic Development Director. CITY OF DUBUQUE, IOWA MEMORANDUM February 10, 2000 TO: Michael Van Milligen, City Manager FROM: James Burke, Community and Economic Developement Director SUBJECT: Authorization to Issue $3,168,538 Urban Renewal Tax Increment Revenue Bond for Eagle Window & Door Project INTRODUCTION This memorandum presents for City Council approval a resolution authorizing the issuance of a $3,168,538 tax increment revenue bond to support Eagle Window & Door's expansion project at the Kerper Boulevard Industrial Park. The documents have been revised since original approval on December 7, 1999. BACKGROUND On August 2, 1999, the City Council held a public hearing on the proposed issuance of tax increment revenue bonds for the Eagle Window & Door project. With no objections from the public, the Council adopted a resolution to institute proceedings and take additional action for the sale and issuance of bonds not to exceed $3,200,000. On December 7, 1999, the City Council authorized the original bond issuance. Due to delays in closing the property sale to the developer, Henuan Ahlers (Otto A, LLC, a Nevada limited liability company), the financing tenus of the bond changed which requires that the bond documents to be revised. A closing is anticipated for February 15,2000 at which time the bond sale will also be completed. DISCUSSION Attached is a letter from Dubuque Bank & Trust outlining their latest proposal for the bond. The City's bond counsel has reviewed and approved the proposal and has incorporated the appropriate terms of the proposal into the revised bond documents. The attached resolution, along with the bond and bond purchase agreement, have been prepared by the bond counsel. The documents provide for the issuance of the bond under tenus and conditions acceptable to the developer and lender. The developer will net $2,700,000 from the bond sale for the project. The balance of$468,538 will be used to cover issuance fees and capitalized interest payments which are needed until the new taxes on the property are actually collected. The bond will be repaid over a twelve year period by ten years of property taxes paid by Eagle Window & Door as negotiated in their lease with the developer. By separate contract, the developer has agreed to fund any shortfall between incremental tax collections and loan payments. The developer has also agreed that the TIF bond proceeds will be disbursed as progress payments during construction of the building. RECOMMENDATION I recommend that the City Council adopt the attached resolution authorizing the revised issuance ofa $3,168,538 urban renewal tax increment revenue bond to assist Eagle Window & Door's expansion project at the Kerper Boulevard Industrial Park. As provided in the Development Agreement, the company will retain 475 existing jobs and create not less than 168 new full-time jobs with this expansion and create not less than $17.5 million in new assessed value in the Industrial Park. ACTION STEP The action step for the City Council is to adopt the attached resolution and authorize and direct the appropriate signatures on the bond and the bond Purchase Agreement on behalf of the City of Dubuque, attachments Prepared by: Pamela Myhre Economic Development Planner February 10, 2000 February 9, 2000 Ms, Pam Myhre c/o City of Dubuque Community & Economic Development Department 50 West 13th Street Dubuque, IA 52001-4864 Re: TIF proposal for Ahlers/Otto A LLC project Dear Pam: Dubuque Bank and Trust Company is pleased to provide the following proposal for the above-referenced TIF loan to the City of Dubuque: BORROWER: City of Dubuque LOAN AMOUNT: $3,168,538.06 PROCEEDS TO OTTO A, LLC $2,700,000,00 OTHER USE OF PROCEEDS: $20,000,00 Estimated ceiling on fee for bond counsel for City of Dubuque $4,600.00 Estimated ceiling for fee for Bank's legal counsel ($10,000.00 will be paid in full; Developer will pay difference of $5,400.00 outside the TIF). $0.00 Fee payable to Bank ($10,000 will be paid by the Developer outside the TIF), $0.00 Minimum amount to be funded into an Escrow Account to be held by the City of Dubuque for the sole use of future tax payments to be applied to the loan, (A tax escrow will be funded outside thc TIF), $443,938.06 Available funds for anticipated interest payments during construction $ 468,538.06 Total RATE: 9.10% per annum fixed during the entire loan tenu, TERMS: The loan is anticipated to be funded on or near February 15, 2000. Semi-annual interest payments will be due beginning June 30, 2000, and continue through June 30, 2002. Nineteen semi-annual principal and interest payments of $244,642,65 will begin on December 31, 2002, The final payment of the entire unpaid balance of principal and interest will due June 30, 2012, An amortization schedule is attached which details the proposed repayment schedule, It is the Bank's understanding that the source ofrepayment for this loan is the revenue to be collected from the real estate taxes paid by Otto A, LLC to the Dubuque County Treasurer. The minimum assessed value for Otto A, LLC has been estimated at $17,500,000, Based on today's tax rate, the annual revenue stream is approximately $489,285.30, Our initial projection of annual debt service is $489,285.30. This does not provide a cushion for changes in the tax rate, However, in the event the tax rate falls below the level required to service the debt, we understand there will be an agreement between the City of Dubuque, Otto A, LLC, American Architectural Products Corporation, and Eagle Window and Door, Inc., to pay the difference between the amount the City receives in tax revenues and the debt service requirement. Purpose of Ietter: This letter shall not be deemed as evidence of a binding agreement on the part of either the Bank or the City of Dubuque, Important tenus may remain to be negotiated, and even if an agreement in principal should be reached on the tenus of the financing at a subsequent date, neither party to the financing shall be legally bound until definitive loan documents have been signed by all the respective parties, The City of Dubuque shall execute and deliver definitive loan documents in fonu and substance satisfactory to tl1e Bank and its legal counsel, as well as the City's legal counsel. Any advance of funds shall be conditioned upon compliance with all applicable conditions and terms contained in each such loan document. Thanks for the opportunity to provide this financing proposal. If you have any questions regarding this proposal, please call me at (319) 589-2109. Sincerely, Steven M, Baumhover Vice President Commercial Lending Ahlers/Otto A LLC project Recap of cash flows for City of Dubuque TIF Assumptions: Nominal annual rate: 9,1000% Periodic rate: 4,5500% Regular payment: $244,642,65 Loan PmL D.a1e. ðd'ianœ E'irtrruill1 ~ Ectnc.ipaI Ba!illJœ Ii 12/31/1999 0,00 01/31/2000 0,00 02/15/2000 24,600,00 0,00 24,600,00 03/01/2000 92,00 24,600,00 06/01/2000 675,000,00 564,25 699,600,00 06/30/2000 5,714.45 5,714.45 5,058,20 705,314.45 09/01/2000 675,000,00 11,078,27 1,380,314.45 12/01/2000 675,000,00 31,316,12 2,055,314.45 12/31/2000 57,767,01 57,767,01 15,372.63 2,113,081.47 03/31/2001 675,000,00 47,414,07 2,788,081.47 06/30/2001 110,669.15 110,669,15 63,255,08 2,898,750,62 12/31/2001 131,893,15 131,893,15 131,893,15 3,030,643,77 06/30/2002 137,894,29 137,894,29 137,894,29 3,168,538,06 12/31/2002 244,642.65 144,168.48 100,474,17 3,068,063,89 1 06/30/2003 244,642.65 139,596,91 105,045,74 2,963,018,15 2 12/31/2003 244,642,65 134,817,33 109,825,32 2,853,192,82 3 06/30/2004 244,642,65 129,820,27 114,822,38 2,738,370.45 4 12/31/2004 244,642,65 124,595,86 120,046,79 2,618,323,65 5 06/30/2005 244,642,65 119,133,73 125,508,92 2,492,814,73 6 12/31/2005 244,642,65 113,423,07 131,219,58 2,361,595,15 7 06/30/2006 244,642,65 107,452,58 137,190,07 2,224,405,08 8 12/31/2006 244,642,65 101,210.43 143,432,22 2,080,972.86 9 06/30/2007 244,642,65 94,684,27 149,958,38 1,931,014.48 10 12/31/2007 244,642,65 87,861,16 156,781.49 1,774,232,98 11 06/30/2008 244,642,65 80,727,60 163,915,05 1,610,317,93 12 12/31/2008 244,642,65 73,269.47 171,373,18 1,438,944,75 13 06/30/2009 244,642,65 65,471,99 179,170,66 1,259,774,09 14 12/31/2009 244,642,65 57,319,72 187,322,93 1,072,451,16 15 06/30/2010 244,642,65 48,796,53 195,846,12 876,605,04 16 ~~. ~.~~. ,~ AGENDA - CITY COUNCIL SPECIAL SESSION MONDAY, FEBRUARY 14, 2000 6:15 P.M., PUBLIC LIBRARY AUDITORIUM ACTION ITEM 1. City Manager requesting authorization to issue $3,168,538 in Tax Increment Revenue Bonds to support the Eagle Window and Door Expansion. Repealing Resolution No. 665-99 approved December 7, 1999, and in lieu thereof authorizing and providing for the issuance of a $3,168,538 Urban Renewal Tax Increment Revenue Bond, Taxable Series 2000A, of the City of Dubuque, Iowa, and providing for the securing of such bond for the purpose of carrying out an Urban Renewal Project in the area of the City of Dubuque, Iowa designated as the Kerper Boulevard Industrial Park Economic Development District. February 10, 2000 Jeanne F. Schneider 3:00 p.m.