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Paragon Square_Urban Renewal TIF Notes and Development AgreementMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager Dubuque htkill AU-America City 1 1 1 2007 SUBJECT: Development Agreement with Paragon Square and Issuance of Not to Exceed $350,000 Urban Renewal Tax Increment Revenue Notes for Paragon Square, LLC DATE: August 10, 2011 Economic Development Director Dave Heiar recommends City Council approval of a Development Agreement with Paragon Square LLC and approval of the sale of Tax Increment Financing bonds up to $350,000 to assist in the renovation of the former Holy Ghost School and Convent buildings. The Archdiocese of Dubuque recently sold the former Holy Ghost School and Convent to Pegasus Properties. Pegasus plans to rehabilitate the historic structures into apartment buildings. For the projects to be financially feasible for the developer, Pegasus requested the buildings be placed in an Urban Renewal District to allow for the use of Tax Increment Financing to assist the project. Developer will make a capital investment of not less than two million four hundred thousand dollars ($2,400,000.00) to acquire and improve the Property (the Minimum Improvements). The Minimum Improvements include creating twenty (20) apartments for market -rate rental. Such improvements shall conform with the U.S. Department of the Interior Secretary Standards for Historic Rehabilitation. The project shall be substantially complete by December 31, 2012. To accommodate the rehabilitation costs, the developer has requested the use of Tax Increment Financing as an upfront grant. This grant will be funded by a bond which will be repaid over 10 years by the incremental property taxes associated with this project. This grant will be tied to the construction of 27 market rate residential units. The bond, in an amount not to exceed $350,000, will provide sufficient revenue to give the developer a $300,000 grant, and pay for administrative and interest costs for the first two years, after which time the increase in property valuation will provide sufficient property tax revenue to repay the bond. A Minimum Assessment Agreement will be required to further assure sufficient property tax revenue to accommodate this bond repayment. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager David J. Heiar, Economic Development Director 2 Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: David J. Heiar, Economic Development Director .; SUBJECT: DATE: August 9, 2011 Development Agreement with Paragon Square, LLC Dubuque hfrd All-AmedcaCity 1 2007 t -1 INTRODUCTION This memorandum presents for City Council consideration a Resolution approving a Development Agreement on the former Holy Ghost School and Convent buildings. BACKGROUND The Archdiocese of Dubuque recently sold the former Holy Ghost School and Convent to Pegasus Properties. Pegasus plans to rehabilitate the historic structures into apartment buildings. For the projects to be financially feasible for the developer, Pegasus requested the buildings be placed in an Urban Renewal District to allow for the use of Tax Increment Financing to assist the project. On June 6, 2011, the City Council approved a Resolution of Necessity finding that the proposed area was a blighted area and appropriate for urban renewal activities. Staff has prepared an Urban Renewal Plan for the area as per the directive of the City Council. A consultation process was conducted with the affected taxing entities as required by State Law. The required consultation with affected taxing bodies was held on June 21, 2011. No objections were received. The Plan was reviewed by the Long Range Planning Commission on June 15, 2011. The Long Range Planning Commission has forwarded its recommendation to the City Council affirming that the Plan is consistent with the City's Comprehensive Plan for development. The Urban Renewal Plan created a district to include the former Holy Ghost School and Convent buildings (see Attachment A). The plan would provide this area access to the tools and incentives available to urban renewal district properties, including tax increment financing. 1 DISCUSSION The former Holy Ghost Assisi School building at 2901 Central was rezoned in January to OR Office Residential. The Zoning Board of Adjustment approved a special exception on February 24, 2011 to allow the building to be converted to 18 residential units. The ZBA also approved a variance on December 16, 2010 to allow the former convent building at 2887 Central to be converted to ten residential units. 2887 Central contains the former Holy Ghost convent building, a three story masonry building which is currently vacant. The building will be rehabilitated into nine market rate residential rental units with 11 off - street parking spaces. 2901 Central contains the former Holy Ghost Assisi School building, a four -story masonry building, which is currently vacant. The building will be converted to eighteen market rate residential rental units with 23 off - street parking spaces. The total proposed capital investment for these rehabilitation projects is estimated at $2,490,031. The owners have applied to have both buildings listed on the National Register of Historic Places and will apply for state and federal Historic Tax Credits. The buildings will be renovated under the Secretary of Interior's standards for the renovation of historic properties. To accommodate the rehabilitation costs, the developer has requested the use of TIF as an upfront grant. This grant will be funded by a bond which will be repaid over 10 years by the incremental property taxes associated with this project. This grant will be tied to the construction of 27 market rate residential units. The bond, in an amount not to exceed $350,000, will provide sufficient revenue to give the developer a $300,000 grant, and pay for administrative and interest costs for the first two years after which time the increase in property valuation will provide sufficient property tax revenue to repay the bond. A Minimum Assessment Agreement will be required to further assure sufficient property tax revenue to accommodate this bond repayment. RECOMMENDATION /ACTION STEP I recommend that the City Council approve the Development Agreement with Paragon Square, LLC for the purpose of redeveloping the former Holy Ghost School and Convent buildings. attachments F: \USERS \Eton Dev \Holy Ghost - 2905 Central\2011809 Paragon Square - Holy Ghost approve DA Council memo.docx 2 Holy Ghost Urban Renewal District Version 2011.1 RESOLUTION NO. 281 -11 A RESOLUTION APPROVING A DEVELOPMENT AGREEMENT WITH PARAGON SQUARE, LLC FOR THE PROPERTY LOCATED AT 2887 AND 2901 CENTRAL AVENUE Whereas, the City of Dubuque, Iowa, has created a Downtown Incentives Program for the purpose of stimulating reinvestment in the Holy Ghost Urban Renewal District; and Whereas, the City of Dubuque, Iowa is encouraging the use of financial incentives to help finance code compliance activities and to spur redevelopment; and Whereas, it is the determination of this Council that approval of the Development Agreement for the rehabilitation of the Property owned by Paragon Square, LLC according to the terms and conditions set out in the Development Agreement is in the public interest of the City of Dubuque. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the Development Agreement with Paragon Square, LLC is hereby accepted and approved. Section 2. That the Mayor is hereby authorized to execute, on behalf of the City Council of the City of Dubuque, Iowa, the attached Development Agreement with Paragon Square, LLC. Section 3. That the City Manager is hereby authorized to execute, on behalf of the City Council of the City of Dubuque, Iowa, all necessary grant documents and is further authorized to disburse grant funds in accordance with the terms and conditions of the executed agreement. Passed, approved and adopted this 15 day of August, 2011. K- in S. Firn tahl, Acting City Clerk F: \USERS \Econ Dev \Holy Ghost - 2905 Central\20110809_Resolution Paragon Square Approve DA.docx Roy D. Buol, Mayor DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF DUBUQUE, IOWA AND PARAGON SQUARE, LLC. THIS DEVELOPMENT AGREEMENT (Agreement) dated for reference purposes the day of , 2010 is made and entered into by and between the City of Dubuque, Iowa (City), and Paragon Square, LLC, and Illinois limited liability company (Developer). WHEREAS, Developer is the owner of the following described real estate (the Property): Lot 1 -1 and Lot 2 -1 of Paragon Square, in the City of Dubuque, Iowa; and WHEREAS, the Property is located in the Holy Ghost Urban Renewal District (the District) which has been so designated by City Council Resolution 234 -11 as a blighted area (the Project Area) defined by Iowa Code Chapter 403 (the Urban Renewal Law); and WHEREAS, Developer has undertaken the redevelopment of a vacant building located on the Property and will be operating the same during the term of this Agreement; and WHEREAS, Developer will make an additional capital investment in building improvements, equipment, furniture and fixtures in the Property (Project); and WHEREAS, the Property is historically significant and it is in the City's best interest to preserve the Property; and WHEREAS, pursuant to Iowa Code Section 403.6(1), and in conformance with the Urban Renewal Plan for the Project Area adopted on July 18, 2011, a copy of which is attached hereto as Exhibit A (the Urban Renewal Plan), City has the authority to enter into contracts and agreements to implement the Urban Renewal Plan, as amended; and WHEREAS, the Dubuque City Council believes it is in the best interests of the City to encourage Developer in the development of the Property by providing certain incentives as set forth herein. 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: SECTION 1. REPRESENTATIONS AND WARRANTIES 1.1 Representations and Warranties of City. In order to induce Developer to enter into this Agreement, City hereby represents and warrants to Developer that to the best of City's knowledge: (1) City has duly obtained all necessary approvals and consents for its execution, delivery and performance of this Agreement and that it has full power and authority to execute, deliver and perform its obligations under this Agreement. City's attorney shall issue a legal opinion to Developer at time of closing confirming the representation contained herein, in the form attached hereto as Exhibit B. (2) City shall exercise its best efforts to cooperate with Developer in the development process. (3) City shall exercise its best efforts to resolve any disputes arising during the development process in a reasonable and prompt fashion. (4) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of or compliance with the terms and conditions of this Agreement are not prevented by, limited by, in conflict with, or result in a violation or breach of, the terms, conditions or provisions of the charter of City, any evidence of indebtedness, agreement or instrument of whatever nature to which City is now a party or by which it or its property is bound, or constitute a default under any of the foregoing. (5) There are no actions, suits or proceedings pending or threatened against or affecting City in any court or before any arbitrator or before or by any governmental body in which there is a reasonable possibility of an adverse decision which could materially adversely affect the financial position or operations of City or which affects the validity of the Agreement or City's ability to perform its obligations under this Agreement. (6) No ordinance or hearing is now before any local governmental body that either contemplates or authorizes any public improvements or special tax levies, the cost of which may be assessed against the Property. To the best of City's knowledge, there are no plans or efforts by any government agency to widen, modify, or re -align any street or highway providing access to the Property and there are no pending or intended public improvements or special assessments affecting the Property which will result in any charge or lien be levied or assessed against the Property. (7) The representations and warranties contained in this article shall be correct in all respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date. 1.2 Representations and Warranties of Developer. The Developer makes the following representations and warranties: (1) Developer is a limited liability company duly organized and validly existing under the laws of the State of Illinois and authorized to do business in the State of Iowa, and has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as presently proposed to be conducted, and to enter into and perform its obligations under the Agreement. (2) This Agreement has been duly authorized, executed and delivered by Developer and, assuming due authorization, execution and delivery by the City, is in full force and effect and is a valid and legally binding instrument of Developer enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting creditors' rights generally. Developer's counsel shall issue a legal opinion to the City, at time of closing, confirming the representations contained herein, in the form attached hereto as Exhibit C. (3) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of or compliance with the terms and conditions of this Agreement are not prevented by, limited by, in conflict with, or result in a violation or breach of, the terms, conditions or provisions of the articles of incorporation or the bylaws of Developer or any contractual restriction, evidence of indebtedness, agreement or instrument of whatever nature to which Developer is now a party or by which it or its property is bound, or constitute a default under any of the foregoing. (4) There are no actions, suits or proceedings pending or threatened against or affecting Developer in any court or before any arbitrator or before or by any governmental body in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, financial position or result of operations of Developer or which affects the validity of the Agreement or Developer's ability to perform its obligations under this Agreement. (5) Developer will perform its obligations under this Agreement in accordance with the material terms of this Agreement, the Urban Renewal Plan and all local, State and federal laws and regulations. (6) Developer will use its best efforts to obtain, or cause to be obtained, in a timely manner, all material requirements of all applicable local, state, and federal laws and regulations which must be obtained or met. (7) Developer has firm commitments for permanent financing for the Project in an amount sufficient, together with equity commitments, to successfully complete the requirements of this Agreement and shall provide evidence thereof to City prior to the Closing Date. 1.3 Closing. The closing shall take place on the Closing Date which shall be the 30th day of September, 2011, or such other date as the parties shall agree in writing but in no event shall the Closing Date be later than the 31st day of December, 2011. Consummation of the closing shall be deemed an agreement of the parties to this Agreement that the conditions of closing shall have been satisfied or waived. 1.4 Conditions to Closing. The closing of the transaction contemplated by this Agreement and all the obligations of Developer under this Agreement are subject to fulfillment, on or before the Closing Date, of the following conditions: (1) The representations and warranties made by City in Section 1.1 shall be correct as of the Closing Date with the same force and effect as if such representations were made at such time. At the closing, City shall deliver a certificate to that effect in the form of Exhibit D. (2) Developer shall have the right to terminate this Agreement at any time prior to the consummation of the closing on the Closing Date if Developer determines in its sole discretion that conditions necessary for the successful completion of the Project contemplated herein have not been satisfied in Developer's sole discretion. Upon the giving of notice of termination by Developer to City, this Agreement shall be deemed null and void. (3) Developer and City shall be in material compliance with all the terms and provisions of this Agreement. (4) Developer shall have furnished City with evidence, in a form satisfactory to City (such as a letter of commitment from a bank or other lending institution), that Developer has firm financial commitments in an amount sufficient, together with equity commitments, to complete the Minimum Improvements (as defined herein) in conformance with the Construction Plans (as defined herein), or City shall have received such other evidence of Developer's financial ability as the reasonable judgment of the City requires. (5) Developer's counsel shall issue a legal opinion to the City confirming the representations contained herein in the form attached hereto as Exhibit C. 1.5 City's Obligations at Closing. At or prior to the Closing Date, City shall deliver to Developer such other documents as may be required by this Agreement, all in a form satisfactory to Developer. SECTION 2. DEVELOPMENT ACTIVITIES 2.1 Required Minimum Improvements. Developer will make a capital investment of not less than two million four hundred thousand dollars ($2,400,000.00) to acquire and improve the Property (the Minimum Improvements). The Minimum Improvements include creating twenty (20) apartments for market -rate rental. Such improvements shall conform with the U.S. Department of the Interior Secretary Standards for Historic Rehabilitation. 2.2 [This section intentionally left blank] 2.3 Plans for Construction of Minimum Improvements. Plans and specifications with respect to the development of the Property and the construction of the Minimum Improvements thereon (the Construction Plans) shall be in conformity with Urban Renewal Plan, this Agreement, and all applicable state and local laws and regulations, including but not limited to any covenants, conditions, restrictions, reservations, easements, liens and charges, recorded in the records of Dubuque County, Iowa. Developer shall submit to City, for approval by City, plans, drawings, specifications, and related documents with respect to the improvements to be constructed by Developer on the Property. All work with respect to the Minimum Improvements shall be in substantial conformity with the Construction Plans approved by City. 2.4 Timing of Improvements. Developer hereby agrees that construction of the Minimum Improvements on the Property shall be commenced within thirty (30) days after the Closing Date, and shall be substantially completed by December 31, 2012. The time frames for the performance 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 extraordinary delays. The time for performance of such obligations shall be extended only for the period of such delay. 2.5 Certificate of Completion. Promptly following the request of Developer upon completion of the Minimum Improvements, City shall furnish Developer with an appropriate instrument so certifying. Such certification (the Certificate of Completion) shall be in recordable form and shall be a conclusive determination of the satisfaction and termination of the agreements and covenants in this Agreement. SECTION 3. CITY PARTICIPATION 3.1 This section intentionally left blank. 3.2 Economic Development Grant. In the event Developer so elects, and in consideration of Developer's commitments as provided herein, City agrees, subject to the conditions set forth in this Section, to make an Economic Development Grant to Developer on the Closing Date, or such other date as the parties shall mutually agree upon in writing ( "Funding Date "). The Economic Development Grant shall not exceed three hundred fifty thousand dollars ($350,000) (or such other amount determined as provided in Section 3.2(1)(a) hereof) and shall be payable solely and only from the proceeds of the sale of urban renewal tax increment revenue bonds or notes by City as described in Subsection (a) below, and not from any other source. (a) Issuance of Notes. Developer acknowledges and agrees that City intends to finance its costs associated with the funding of the Economic Development Grant to Developer through the issuance of urban renewal tax increment revenue bonds or notes to be issued by City under the provisions of Section 403.9 of the Iowa Code, the Urban Renewal Act and this Section (such obligation being referred to herein as the Notes). Developer further acknowledge and agree that it shall identify for City a purchaser for the Notes (the Purchaser) and City agrees to negotiate in good faith with the Purchaser with respect to the terms of the Notes. Developer further acknowledges and agrees that the Notes shall be sold on such terms and conditions, bear such interest rates, have such reserve funding requirements, mature at such times and in such amounts as City, in its sole but reasonable, good faith discretion, shall determine to be acceptable to it and the Purchaser and shall be payable from and secured solely and only by a pledge of the Tax Increment Revenues" collected by City in respect of the Property and the Minimum Improvements located thereon during a period not to exceed ten (10) years. The parties hereto intend that the Notes will be issued in the maximum amount not to exceed three hundred fifty thousand and no /100 dollars ($350,000) plus advances for accrued interest and issuance costs or such lesser amount that can be repaid from the Tax Increment Revenues collected by City in respect of the Property and the Minimum Improvements during a period of ten (10) years, taking into account the Purchaser's requirements for debt service coverage and reserve funding. Proceeds of the Notes shall be applied only to the payment of capitalized interest thereon, if necessary, debt service reserve funding, costs of issuance and the payment of the Economic Development Grant. City shall have no obligation to fund the Economic Development Grant to be paid hereunder from any source other than the proceeds of the Notes. City's obligation to issue the Notes and undertake its obligations hereunder shall be subject in all respects to unavoidable delays as determined in Section 2.3, the provisions of this Section, and to the satisfaction of all conditions required, in the reasonable judgment of bond counsel for City, by Chapter 403 of the Code of Iowa, as amended, with respect to the issuance of the Notes. (b) Limitations on Financial Undertakings of City. Notwithstanding any other provisions of this Agreement, City shall have no obligation to Developer under this Agreement to issue the Notes or to fund the Economic Development Grant to Developer, if any of the following conditions exist as of the Funding Date: i. City is unable to complete the sale of the Notes on such terms and conditions as it shall deem necessary or desirable in its sole, but reasonable, good faith discretion; or ii. City is entitled (or, with the passage of time or giving of notice, or both, would be entitled) under Section 5 of this Agreement to exercise any remedies set forth therein as a result of any Event of Default; or iii. There has been, or there occurs, a material change in the financing commitments secured by Owner for construction of Minimum Improvements, which change(s) make it substantially more likely, in the reasonable judgment of City, that Developer will be unable to fulfill its covenants and obligations under this Agreement to cause Owner to construct the Minimum Improvements; or iv. City shall not have received a legal opinion from Developer's counsel in substantially the form attached hereto as Exhibit C. (c) Use of Tax Increments. Developer recognizes that City intends to utilize the Tax Increment Revenues collected each year in respect of Minimum Improvements to pay debt service on the Notes. Notwithstanding the foregoing, City shall be free to use all Tax Increment Revenues collected each year in respect of Minimum Improvements or other properties within Project Area for any purpose for which the Tax Increment Revenues may lawfully be used pursuant to the provisions of the Urban Renewal Act, and City shall have no obligation to Developer with respect to use thereof. 3.3 City shall be free to use any and all tax increment revenues collected in respect of other properties within the Project Area and the remaining actual amount of the property taxes paid by Developer to City, or any available Developer Tax Increments resulting from the termination of the annual Economic Development Grant under Section 3.2 hereof, for any purpose for which such tax increment revenues may lawfully be used pursuant to the provisions of the Urban Renewal Law, and City shall have no obligations to Developer with respect to the use thereof. SECTION 4. COVENANTS OF DEVELOPER 4.1 The Minimum Improvements to the Property shall conform to the U.S. Secretary of the Interior's Standards for Rehabilitation. 4.2 Execution of Assessment Agreement. Developer shall agree to, and with City, shall execute, as soon as the plans and specifications for Minimum Improvements are prepared, but no later than Closing Date, an Assessment Agreement substantially in the form attached hereto as Exhibit F (Assessment Agreement) pursuant to the provisions of Section 403.6(19) of the Code of Iowa specifying the Assessor's Minimum Actual Value for Property and Minimum Improvements for calculation of real property taxes. Specifically, Developer shall agree to a minimum actual value for Property and Minimum Improvements which will result in a minimum actual value as of January 1, 2012 of not less than one million five hundred thousand dollars ($1,500,000.00) (such minimum actual value at the time applicable is herein referred to as the "Assessor's Minimum Actual Value "). Nothing in the Assessment Agreement shall limit the discretion of the Assessor to assign an actual value to Property in excess of such Assessor's Minimum Actual Value nor prohibit Developer from seeking through the exercise of legal or administrative remedies a reduction in such actual value for property tax purposes; provided, however, that Developer shall not seek a reduction of such actual value below Assessor's Minimum Actual Value in any year so long as Assessment Agreement shall remain in effect. The Assessment Agreement shall remain in effect until June 1, 2022 (the "Termination Date "). Assessment Agreement shall be certified by the Assessor for City as provided in Iowa Code Section 403.6(19) and shall be filed for record in the office of the County Recorder of Dubuque County, and such filing shall constitute notice to any subsequent encumbrancer or purchaser of Property (or part thereof), whether voluntary or involuntary, and such Assessment Agreement shall be binding and enforceable in its entirety against any such subsequent purchaser or encumbrancer 4.3 Books and Records. During the term of this Agreement, Developer shall keep at all times and make available to City upon reasonable request proper books of record and account in which full, true and correct entries will be made of all dealings and transactions of or in relation to the business and affairs of Developer in accordance with generally accepted accounting principles consistently applied throughout the period involved, and Developer shall provide reasonable protection against loss or damage to such books of record and account. 4.4 Real Property Taxes. Developer shall pay or cause to be paid, when due, all real property taxes and assessments payable with respect to all and any parts of the Property unless Developer's obligations have been assumed by another person pursuant to the provisions of this Agreement. 4.5 No Other Exemptions. During the term of this Agreement, Developer agrees not to apply for any state or local property tax exemptions which are available with respect to the Development Property or the Minimum Improvements located thereon that may now be, or hereafter become, available under state law or city ordinance during the term of this Agreement, including those that arise under Iowa Code Chapters 404 and 427, as amended. 4.6 Insurance Requirements. (1) Developer shall provide and maintain or cause to be maintained at all times during the process of constructing the Minimum Improvements (and, from time to time at the request of City, furnish City with proof of insurance in the form of a certificate of insurance for each insurance policy): All risk builder's risk insurance, written on a Completed Value Form in an amount equal to one hundred percent (100 %) of the replacement value when construction is completed. (2) Upon completion of construction of the Minimum Improvements and up to the Termination Date, Developer shall maintain, or cause to be maintained, at its cost and expense (and from time to time at the request of City shall furnish proof of insurance in the form of a certificate of insurance) all risk property insurance against loss and /or damage to the Minimum Improvements under an insurance policy written in an amount not less than the full insurable replacement value of Minimum Improvements. The term "replacement value" shall mean the actual replacement cost of Minimum Improvements (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items) and equipment, and shall be reasonably determined from time to time at the request of City, but not more frequently than once every three (3) years. (3) The term "replacement value" shall mean the actual replacement cost of the building with Minimum Improvements (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items) and equipment, and shall be reasonably determined from time to time at the request of City, but not more frequently than once every three (3) years. (4) Developer shall notify City immediately in the case of damage exceeding $50,000 in amount to, or destruction of, the Minimum Improvements or any portion thereof resulting from fire or other casualty. Net proceeds of any such insurance (Net Proceeds), shall be paid directly to Developer as its interests may appear, and Developer shall forthwith repair, reconstruct and restore the Minimum Improvements to substantially the same or an improved condition or value as they existed prior to the event causing such damage and, to the extent necessary to accomplish such repair, reconstruction and restoration, Developer shall apply the Net Proceeds of any insurance relating to such damage received by Developer to the payment or reimbursement of the costs thereof, subject, however, to the terms of any mortgage encumbering title to the Property (as its interests may appear). Developer shall complete the repair, reconstruction and restoration of Minimum Improvements whether or not the Net Proceeds of insurance received by Developer for such purposes are sufficient. 4.7 Preservation of Property. During the term of this Agreement, Developer shall maintain, preserve and keep, or cause others to maintain, preserve and keep, the Minimum Improvements in good repair and working order, ordinary wear and tear accepted, and from time to time shall make all necessary repairs, replacements, renewals and additions. 4.8 Non - Discrimination. In carrying out the project, Developer shall not discriminate against any employee or applicant for employment because of race, religion, color, sex, sexual orientation, gender identity, national origin, age or disability. 4.9 Conflict of Interest. Developer agrees that no member, officer or employee of City, or its designees or agents, nor any consultant or member of the governing body of City, and no other public official of City who exercises or has exercised any functions or responsibilities with respect to the project during his or her tenure, or who is in a position to participate in a decision - making process or gain insider information with regard to the project, shall have any interest, direct or indirect, in any contract or subcontract, or the proceeds thereof, for work to be performed in connection with the project, or in any activity, or benefit therefrom, which is part of this project at any time during or after such person's tenure. In connection with this obligation, Developer shall have the right to rely upon the representations of any party with whom it does business and shall not be obligated to perform any further examination into such party's background. 4.10 Non - Transferability. Until such time as the Minimum Improvements are complete (as certified by City under Section 2.5), this Agreement may not be assigned by Developer nor may the Property be transferred by Developer to another party. Thereafter, with the prior written consent of City, which shall not be unreasonably withheld, Developer shall have the right to assign this Agreement, and upon assumption of the Agreement by the assignee, Developer shall no longer be responsible for its obligations under this Agreement. 4.11 No change in Tax Classification. Developer agrees that it will not take any action to change, or otherwise allow, the classification of the Property for property tax purposes to become other than commercial property and to be taxed as such under Iowa law. 4.12 Restrictions on Use. Developer agrees for itself, and its successors and assigns, and every successor in interest to the Property or any part thereof that they, and their respective successors and assigns, shall: (1) Devote the Property to, and only to and in accordance with, the uses specified in the Urban Renewal Plan (and City represents and agrees that use of the Property as market rate housing, is in full compliance with the Urban Renewal Plan) (however, Developer shall not have any liability to City to the extent that a successor in interest shall breach this covenant and City shall seek enforcement of this covenant directly against the party in breach of same); and (2) Not discriminate upon the basis of race, religion, color, sex, sexual orientation, gender identity, national origin, age or disability in the sale, lease, rental, use or occupancy of the Property or any improvements erected or to be erected thereon, or any part thereof (however, Developer shall not have any liability to City to the extent that a successor in interest shall breach this covenant and City shall seek enforcement of this covenant directly against the party in breach of same). 4.13 Compliance with Laws. Developer shall comply with all laws, rules and regulations relating to its businesses, other than laws, rules and regulations the failure to comply with or the sanctions and penalties resulting therefrom, would not have a material adverse effect on the business, property, operations, financial or otherwise, of Developer. SECTION 5. EVENTS OF DEFAULT AND REMEDIES 5.1 Events of Default Defined. The following shall be Events of Default under this Agreement and the term Event of Default shall mean, whenever it is used in this Agreement, any one or more of the following events: (1) Failure by Developer to pay or cause to be paid, before delinquency, all real property taxes assessed with respect to the Minimum Improvements and the Property. (2) Failure by Developer to cause the construction of the Minimum Improvements to be commenced and completed pursuant to the terms, conditions and limitations of this Agreement. (3) Transfer of any interest by Developer of the Minimum Improvements in violation of the provisions of this Agreement prior to the issuance of the final Certificate of Completion. (4) Failure by Developer or City to substantially observe or perform any other material covenant, condition, obligation or agreement on its part to be observed or performed under this Agreement. 5.2. Remedies on Default by Developer. Whenever any Event of Default referred to in Section 5.1 of this Agreement occurs and is continuing, City, as specified below, may take any one or more of the following actions after the giving of written notice by City to Developer (and the holder of any mortgage encumbering any interest in the Property of which City has been notified of in writing) of the Event of Default, but only if the Event of Default has not been cured within sixty (60) days following such notice, or if the Event of Default cannot be cured within sixty (60) days and Developer does not provide assurances to City that the Event of Default will be cured as soon as reasonably possible thereafter: (1) City may suspend its performance under this Agreement until it receives assurances from the Developer deemed adequate by City, that the Developer will cure its default and continue its performance under this Agreement; (2) Until the Closing Date, City may cancel and rescind this Agreement; (3) City shall be entitled to recover from Developer the sum of all amounts expended by City in connection with the funding of the Downtown Rehab Loan /Grant and Economic Development Grant to Developer and City may take any action, including any legal action it deems necessary, to recover such amounts from the Developer; (4) City may withhold the Certificate of Completion; or (5) City may take any action, including legal, equitable or administrative action, which may appear necessary or desirable to collect any payments due under this Agreement or to enforce performance and observance of any obligation, agreement, or covenant under this Agreement. 5.3 No Remedy Exclusive. No remedy herein conferred upon or reserved to City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. 5.4 No Implied Waiver. In the event any agreement contained in this Agreement should be breached by any party and thereafter waived by any other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other concurrent, previous or subsequent breach hereunder. 5.5 Agreement to Pay Attorneys' Fees and Expenses. If any action at law or in equity, including an action for declaratory relief or arbitration, is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs of litigation from the other party. Such fees and costs of litigation may be set by the court in the trial of such action or by the arbitrator, as the case may be, or may be enforced in a separate action brought for that purpose. Such fees and costs of litigation shall be in addition to any other relief that may be awarded. 5.6 Remedies on Default by City. If City defaults in the performance of this Agreement, Developer may take any action, including legal, equitable or administrative action that may appear necessary or desirable to collect any payments due under this Agreement, to recover expenses of Developer, or to enforce performance and observance of any obligation, agreement, or covenant of City under this Agreement. Developer may suspend their performance under this Agreement until they receive assurances from City, deemed adequate by Developer, that City will cure its default and continue its performance under this Agreement. SECTION 6. GENERAL TERMS AND PROVISIONS 6.1 Notices and Demands. Whenever this Agreement requires or permits any notice or written request by one party to another, it shall be deemed to have been properly given if and when delivered in person or three (3) business days after having been deposited in any U.S. Postal Service and sent by registered or certified mail, postage prepaid, addressed as follows: If to Developer: Paragon Square, LLC. Attn: Mark Hope 800 Spring Street, Suite 101 Galena, IL 61036 With copy to: D. Flint Drake Drake & Freund P.C. 1005 Main Street, Suite 200 Dubuque, IA 52001 If to City: City Manager 50 W. 13th Street Dubuque, Iowa 52001 Phone: (563) 589 -4110 Fax: (563) 589 -4149 With copy to: City Attorney City Hall 50 W. 13 Street Dubuque IA 52001 Or at such other address with respect to either party as that party may, from time to time designate in writing and forward to the other as provided in this Section. 6.2 Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of City and Developer and their respective successors and assigns. 6.3 Termination Date. This Agreement and the rights and obligations of the parties hereunder shall terminate on June 1, 2025 (the Termination Date). 6.4. Execution By Facsimile. The parties agree that this Agreement may, be transmitted between them by facsimile machine. The parties intend that the faxed signatures constitute original signatures and that a faxed Agreement containing the signatures (original or faxed) of all the parties is binding on the parties. 6.5 Memorandum of Development Agreement. Developer shall promptly record a Memorandum of Development Agreement in the form attached hereto as Exhibit F in the office of the Recorder of Dubuque County, Iowa. Developer shall pay the costs for so recording. IN WITNESS WHEREOF, City has caused this Agreement to be duly executed in its name and behalf by its Mayor and attested to by its City Clerk and Developer has caused this Agreement to be duly executed on or as of the first above written. CITY OF DU : UQUE, IOWA PARAGON SQUARE, LLC. By By Roy D. Bu. / , Mark Hope Mayor President Attest: Ke in S. Firn ahl Acting City Clerk City Attorney City Hall 50 W. 13 Street Dubuque IA 52001 (City Seal) STATE OF IOWA COUNTY OF DUBUQUE ) ) ) SS On this day of 20_, before me the undersigned, a Notary Public in and for the said County and State, personally appeared Roy D. Buol and Kevin S. Firnstahl, to me personally known, who, being by me duly sworn, did say that they are the Mayor and Acting 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 Acting 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 COUNTY OF DUBUQUE ) ) ) SS On this day of 20_, before me the undersigned, a Notary Public in and for the State of Iowa, personally appeared Mark Hope, to me personally known, who, being by me duly sworn, did say that he is the President of Paragon Square, LLC, the corporation executing the instrument to which this is attached and that as said President of Paragon Square, LLC. 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 F: \USERS \Econ Dev\Holy Ghost - 2905 Central\20110805 Holy Ghost DA_ docx EXHIBIT A EXHIBIT B EXHIBIT C EXHIBIT D EXHIBIT E EXHIBIT F — LIST OF EXHIBITS — Urban Renewal Plan — City Attorney Certificate — Opinion of Developer Counsel — City Certificate — Memorandum of Development Agreement Minimum Assessment Agreement EXHIBIT A URBAN RENEWAL PLAN EXHIBIT B CITY ATTORNEY'S CERTIFICATE BARRY A. LINDAHL, ESQ. CITY ATTORNEY RE: Dear (DATE) THE CITY OF DUBU I have acted as counsel for the City of Dubuque, Iowa, in connection with the execution and delivery of a certain Development Agreement between (Developer) and the City of Dubuque, Iowa (City) dated for reference purposes the day of 20 The City has duly obtained all necessary approvals and consents for its execution, delivery and performance of this Agreement and has full power and authority to execute, deliver and perform its obligations under this Agreement, and to the best of my knowledge, the representations of the City Manager in his letter dated the day of , 20_, are correct. Very sincerely, Barry A. Lindahl, Esq. City Attorney BAL:tls EXHIBIT C OPINION OF DEVELOPER'S COUNSEL Mayor and City Councilmembers City Hall 13tn and Central Avenue Dubuque IA 52001 Re: Development Agreement Between the City of Dubuque, Iowa and Dear Mayor and City Councilmembers: We have acted as counsel for , (Developer) in connection with the execution and delivery of a certain Development Agreement (Development Agreement) between Developer and the City of Dubuque, Iowa ( "City ") dated for reference purposes the day of , 20 . We have examined the original certified copy, or copies otherwise identified to our satisfaction as being true copies, of the Development Agreement and such other documents and records as we have deemed relevant and necessary as a basis for the opinions set forth herein. Based on the pertinent law, the foregoing examination and such other inquiries as we have deemed appropriate, we are of the opinion that: 1. Developer is a corporation organized and existing under the laws of the State of Illinois and has full power and authority to execute, deliver and perform in full Development Agreement. The Development Agreement has been duly and validly authorized, executed and delivered by Developer and, assuming due authorization, execution and delivery by City, is in full force and effect and is valid and legally binding instrument of Developer enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting creditors' rights generally. 2. The execution, delivery and performance by Developer of the Development Agreement and the carrying out of the terms thereof, will not result in violation of any provision of, or in default under, the articles of incorporation and bylaws of Developer, any indenture, mortgage, deed of trust, indebtedness, agreement, judgment, decree, order, statute, rule, regulation or restriction to which Developer is a party or by which Developer's property is bound or subject. 3. There are no actions, suits or proceedings pending or threatened against or affecting Developer in any court or before any arbitrator or before or by any governmental body in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business (present or prospective), financial position or results of operations of Developer or which in any manner raises any questions affecting the validity of the Agreement or the Developer's ability to perform Developer's obligations thereunder. Very truly yours, w 1- a 00 Hw m w 2 w X U City Manager's Office 50 West 13th Street Dubuque, Iowa 52001 -4864 (563) 589 -4110 phone (563) 589 -4149 fax ctynigr@cityofdubuque.org Dear (DATE) DUBUQ I am the City Manager of the City of Dubuque, Iowa and have acted in that capacity in connection with the execution and delivery of a certain Development Agreement between (Developer) and the City of Dubuque, Iowa (City) dated for reference purposes the day of , 20 . On behalf of the City of Dubuque, I hereby represent and warrant to Developer that: (1) City has duly obtained all necessary approvals and consents for its execution, delivery and performance of this Agreement and that it has full power and authority to execute, deliver and perform its obligations under this Agreement. City's attorney shall issue a legal opinion to Developer at time of closing confirming the representation contained herein, in the form attached hereto as Exhibit B. (2) City shall exercise its best efforts to cooperate with Developer in the development process. (3) City shall exercise its best efforts to resolve any disputes arising during the development process in a reasonable and prompt fashion. (4) The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby, and the fulfillment of or compliance with the terms and conditions of this Agreement are not prevented by, limited by, in conflict with, or result in a violation or breach of, the terms, conditions or provisions of the charter of City, any evidence of indebtedness, agreement or instrument of whatever nature to which City is now a party or by which it or its property is bound, or constitute a default under any of the foregoing. (5) There are no actions, suits or proceedings pending or threatened against or affecting City in any court or before any arbitrator or before or by any governmental body in which there is a reasonable possibility of an adverse decision which could materially adversely affect the financial position or operations of City or which affects the validity of the Agreement or City's ability to perform its obligations under this Agreement. (6) No ordinance or hearing is now or before any local governmental body that either contemplates or authorizes any public improvements or special tax levies, the cost of which may be assessed against the Property. To the best of City's knowledge, there are no plans or efforts by any government agency to widen, modify, or re -align any street or highway providing access to the Property and there are no pending or intended public improvements or special assessments affecting the Property which will result in any charge or lien be levied or assessed against the Property. (7) The representations and warranties contained in this article shall be correct in all respects on and as of the Closing Date with the same force and effect as if such representations and warranties had been made on and as of the Closing Date. Sincerely, Michael C. Van Milligen City Manager MCVM:jh EXHIBIT E MEMORANDUM OF DEVELOPMENT AGREEMENT Prepared by: Barry A. Lindahl 300 Main Street Suite 330 Dubuque IA 52001 563 583 -4113 Return to: Barry A. Lindahl 300 Main Street Suite 330 Dubuque IA 52001 563 583 -4113 MEMORANDUM OF DEVELOPMENT AGREEMENT A Development Agreement by and among the City of Dubuque, Iowa, an Iowa municipal corporation, of Dubuque, Iowa, and Paragon Square, LLC. was made regarding the following described premises: Lot 1 -1 and Lot 2 -1 of Paragon Square, in the City of Dubuque, Iowa The Development Agreement is dated for reference purposes the day of , 2011, and contains covenants, conditions, and restrictions concerning the sale and use of said premises. This Memorandum of Development Agreement is recorded for the purpose of constructive notice. In the event of any conflict between the provisions of this Memorandum and the Development Agreement itself, executed by the parties, the terms and provisions of the Development Agreement shall prevail. A complete counterpart of the Development Agreement, together with any amendments thereto, is in the possession of the City of Dubuque and may be examined at its offices as above provided. Dated this day of , 2011. CITY OF DUBUQUE, IOWA ' PARAGON SQUARE, LLC. By By Roy D. Buol Mark Hope Mayor President Attest: Kevin S. Firnstahl Acting City Clerk STATE OF IOWA COUNTY OF DUBUQUE ) ) ) SS On this day of , 20 , before me, a Notary Public in and for the State of Iowa, in and for said county, personally appeared Roy D. Buol and Kevin S. Firnstahl, to me personally known, who being by me duly sworn did say that they are the Mayor and Acting City Clerk, respectively of the City of Dubuque, a Municipal Corporation, created and existing under the laws of the State of Iowa, and that the seal affixed to said instrument is the seal of said Municipal Corporation and that said instrument was signed and sealed on behalf of said Municipal corporation by authority and resolution of its City Council and said Mayor and Acting City Clerk acknowledged said instrument to be the free act and deed of said Municipal Corporation by it voluntarily executed. Notary Public, State of Iowa STATE OF IOWA COUNTY OF DUBUQUE ) ) ) SS On this day of 20_, before me the undersigned, a Notary Public in and for the State of Iowa, personally appeared Mark Hope, to me personally known, who, being by me duly sworn, did say that he is the President of Paragon Square, LLC, the corporation executing the instrument to which this is attached and that as said President of Paragon Square, LLC. 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, State of Iowa EXHIBIT F MINIMUM ASSESSMENT AGREEMENT Prepared by David J. Heiar, 50 W. 13th Street, Dubuque IA 52001. 563- 589 -4393 Return to David J. Heiar, 50 W. 13th Street, Dubuque IA 52001. 563 - 589 -4393 MINIMUM ASSESSMENT AGREEMENT CITY OF DUBUQUE, IOWA THIS MINIMUM ASSESSMENT AGREEMENT, dated for reference purposes the day of , 2011, between the City of Dubuque, Iowa (City), and Paragon Square, LLC, an Iowa limited liability company with its principal place of business at Dubuque, Iowa (Developer), and the City Assessor of the City of Dubuque (Assessor). WHEREAS, City and Developer have entered into a Development Agreement dated as of , 2011, as amended (Development Agreement) regarding certain real property ( the Property) described in Exhibit A attached hereto, located within the City of Dubuque; and WHEREAS, it is contemplated that Developer will undertake the development of an area (the Project) within the Holy Ghost Urban Renewal District by the construction of the Minimum Improvements on the Property as provided in the Development Agreement; and WHEREAS, pursuant to Section 403.6 of the Iowa Code, as amended, City, and Developer desire to establish a minimum actual value for the Minimum Improvements and the Property, which shall be effective upon substantial completion and from then until this Agreement is terminated pursuant to the terms herein; and WHEREAS, City and Assessor have reviewed the preliminary plans and the specifications for the Minimum Improvements which it is contemplated will be erected. NOW, THEREFORE, the parties to this Agreement, in consideration of the promises, covenants and agreements made by each other, do hereby agree as follows: 1) Commencing January 1, 2012, the minimum actual value which shall be fixed for assessment purposes for the Property described in Exhibit A attached hereto, together with the Minimum Improvements to be constructed thereon by Developer shall be not less than ($ .00), until termination of this Agreement. The parties hereto expect that the construction of the Minimum Improvements will be substantially completed on or before the 1st day of July, 2012. 2) The minimum actual value herein established shall be of no further force and effect and this Agreement shall terminate on the 30th day of June, 2022, the final date of the City's obligation to pay interest or principal with respect to the indebtedness incurred in support of the Project, in the principal amount of $ ,000.00. The final scheduled maturity date of the said indebtedness is , 20 . Provided, further, that in the event said indebtedness had not been fully paid as to principal and interest as of January 1, 20_, this Agreement shall continue in effect for such additional time as shall be required therefore, but not later than January 1, 20_. 3) This Agreement shall be promptly recorded by Developer. Developer shall pay all costs of recording. 4) Neither the preambles nor provisions of this Agreement are intended to, nor shall be construed as, modifying the terms of the Development Agreement between City and Developer. 5) This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties. 29 THE CITY OF DUBUQUE, IOWA By: Roy D. Buol, Mayor ATTEST By: Kevin S. Firnstahl, Acting City Clerk STATE OF IOWA COUNTY OF DUBUQUE ) ) ) SS On this day of , 20 _, before me, the undersigned, a Notary Public in and for the State of Iowa, personally appeared Roy D. Buol and Kevin S. Firnstahl, to me personally known, who, being by me duly sworn, did say that they are the Mayor and Acting City Clerk, respectively, of the City of Dubuque, Iowa; a municipal corporation; that the seal affixed to the foregoing instrument is the corporate seal of the corporation, and that the instrument was signed and sealed on behalf of the corporation, by authority of its City Council, as contained in Resolution No. passed by the City Council on the ; and Roy D. Buol and Jeanne F. Schneider acknowledged the execution of the instrument to be their voluntary act and deed and the voluntary act and deed of the corporation, by it voluntarily executed. Notary Public, State of Iowa 30 PARAGON SQUARE, LLC (DEVELOPER) By: Mark Hope, It's Member STATE OF IOWA ) ) SS DUBUQUE COUNTY ) On this day of , 2011, before me, a Notary Public in and for said county and state, personally appeared Mark Hope, to me personally known, who stated that he is the member of Paragon Square, LLC, and that said instrument was signed on behalf of said company by authority of its members and that he acknowledged the execution of this instrument to be the voluntary act and deed of said company by him and by it voluntarily executed. Notary Public, State of Iowa 31 CONSENT OF LENDER The undersigned, as holder of a mortgage on the Development Property, hereby consents to the Developer's execution and delivery of this Minimum Assessment Agreement and agrees to be bound by the terms hereof to the same extent as the Developer with respect to the Minimum Actual Value set forth herein. By: Its: STATE OF IOWA ) ) SS COUNTY OF ) On this day of , 20 before me, a Notary Public in and for said County, personally appeared , to me personally known, who, being by me duly sworn, did say that that person is the of American Trust & Savings Bank; that said instrument was signed on behalf of said corporation by authority of its Board of Directors; and acknowledged the execution of the foregoing Consent to be the voluntary act and deed of said corporation, by it voluntarily executed. Dated this day of , 20 32 Notary Public in and for said County and State CERTIFICATION OF ASSESSOR The undersigned, having reviewed the plans and specifications for the Minimum Improvements to be constructed and the market value assigned to the land upon which the Minimum Improvements are to be constructed, and being of the opinion that the minimum market value contained in the foregoing Assessment Agreement appears reasonable, hereby certifies as follows: The undersigned Assessor, being legally responsible for the assessment of the property described in the foregoing Assessment Agreement, upon completion of Minimum Improvements to be made on it and in accordance with the Assessment Agreement, certifies that the actual value assigned to such land, building and equipment upon completion shall not be less than Dollars ($ ,000.00) until termination of this Assessment Agreement pursuant to the terms hereof. Rick Engelken, Dubuque City Assessor Date: STATE OF IOWA ) ) SS COUNTY OF DUBUQUE ) Subscribed and sworn to before me by , City Assessor for the City of Dubuque, Iowa. Notary Public in and for the State of Iowa My Commission expires: Date: 33 ■ pe N X & ln#X7R2,........0.X", X X f.£.16.16, ICRRACK,R16.1,1,1,16.1. IRO 1. *76 a IAN X.X.14.01.7. %If}, 707,,, at fe **ft* 74.3,4,1. X X. 7,1 A Masterpiece on the Mississippi Dubuque bitill All-America City 1 1 1 2007 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Issuance of Not to Exceed $350,000 Urban Renewal Tax Increment Revenue Notes for Paragon Square, LLC DATE: August 10, 2011 The Archdiocese of Dubuque recently sold the former Holy Ghost School and Convent to Pegasus Properties. Pegasus plans to rehabilitate the historic structures into apartment buildings. For the projects to be financially feasible for the developer, Pegasus requested the buildings be placed in an Urban Renewal District to allow for the use of Tax Increment Financing to assist the project. To accommodate the rehabilitation costs, the developer has requested the use of Tax Increment Financing as an upfront grant. This grant will be funded by a bond which will be repaid over 10 years by the incremental property taxes associated with this project. This grant will be tied to the construction of 27 market rate residential units. The bond, in an amount not to exceed $350,000, will provide sufficient revenue to give the developer a $300,000 grant, and pay for administrative and interest costs for the first two years, after which time the increase in property valuation will provide sufficient property tax revenue to repay the bond. A Minimum Assessment Agreement will be required to further assure sufficient property tax revenue to accommodate this bond repayment. Economic Development Director Dave Heiar recommends City Council approval of the sale of Tax Increment Financing bonds up to $350,000 to assist in the renovation of the former Holy Ghost School and Convent buildings. I concur with the recommendation and respectfully request Mayor and City Council approval. MCVM:jh Michael C. Van Milligen Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager David J. Heiar, Economic Development Director 2 Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: David J. Heiar, Economic Development Director Dubuque krakd AI4medcaCity 1 1 1 ' 2007 SUBJECT: Issuance of Not to Exceed $350,000 Urban Renewal ax Increment Revenue Notes for Paragon Square, LLC DATE: August 9, 2011 INTRODUCTION This memorandum presents for City Council adoption of a Resolution instituting proceedings and authorizing the issuance of not to exceed $350,000 in Urban Renewal Tax Increment Revenue Notes to assist in the renovation of the former Holy Ghost School and Convent buildings. BACKGROUND The Archdiocese of Dubuque recently sold the former Holy Ghost School and Convent to Pegasus Properties. Pegasus plans to rehabilitate the historic structures into apartment buildings. For the projects to be financially feasible for the developer, Pegasus requested the buildings be placed in an Urban Renewal District to allow for the use of Tax Increment Financing to assist the project. On June 6, 2011, the City Council approved a Resolution of Necessity finding that the proposed area was a blighted area and appropriate for urban renewal activities. Staff has prepared an Urban Renewal Plan for the area as per the directive of the City Council. A consultation process was conducted with the affected taxing entities as required by State Law. The required consultation with affected taxing bodies was held on June 21, 2011. No objections were received. The Plan was reviewed by the Long Range Planning Commission on June 15, 2011. The Long Range Planning Commission has forwarded its recommendation to the City Council affirming that the Plan is consistent with the City's Comprehensive Plan for development. The Urban Renewal Plan created a district to include the former Holy Ghost School and Convent buildings (see Attachment A). The plan would provide this area access to the tools and incentives available to urban renewal district properties, including tax increment financing. On August 1, 2011, the City Council set for public hearing the proposed action of the City Council to issue notes for Paragon Square, LLC. DISCUSSION The former Holy Ghost Assisi School building at 2901 Central was rezoned in January to OR Office Residential. The Zoning Board of Adjustment approved a special exception on February 24, 2011 to allow the building to be converted to 18 residential units. The ZBA also approved a variance on December 16, 2010 to allow the former convent building at 2887 Central to be converted to ten residential units. 2887 Central contains the former Holy Ghost convent building, a three story masonry building which is currently vacant. The building will be rehabilitated into nine market rate residential rental units with 11 off - street parking spaces. 2901 Central contains the former Holy Ghost Assisi School building, a four -story masonry building, which is currently vacant. The building will be converted to eighteen market rate residential rental units with 23 off - street parking spaces. The total proposed capital investment for these rehabilitation projects is estimated at $2,490,031. The owners have applied to have both buildings listed on the National Register of Historic Places and will apply for state and federal Historic Tax Credits. The buildings will be renovated under the Secretary of Interior's standards for the renovation of historic properties. To accommodate the rehabilitation costs, the developer has requested the use of TIF as an upfront grant. This grant will be funded by a bond which will be repaid over 10 years by the incremental property taxes associated with this project. This grant will be tied to the construction of 27 market rate residential units. The bond, in an amount not to exceed $350,000, will provide sufficient revenue to give the developer a $300,000 grant, and pay for administrative and interest costs for the first two years after which time the increase in property valuation will provide sufficient property tax revenue to repay the bond. A Minimum Assessment Agreement will be required to further assure sufficient property tax revenue to accommodate this bond repayment. The developer will be required to bring a bond purchaser to close this transaction. RECOMMENDATION /ACTION STEP I recommend that the attached proceeding prepared by Bond Counsel Bill Noth be utilized to adopt the attached resolutions and proceed with the issuance of not to exceed $350,000 in Urban Renewal Tax Increment Revenue Notes to support the reinvestment efforts in this district. attachments F: \USERS\Econ Dev\Holy Ghost - 2905 Central\20110809 Paragon - Holy Ghost public hearing NOTES Council memo.docx 2 AHLERS &COONEY, P.C. 100 COURT AVENUE. SUITE 600 DES MOINES, IOWA 50309 -2231 PHONE: 515 -243 -7611 FAX: 515 -243 -2149 WWW.AHLERSLAW.COM William J. Noth wnoth @ahlerslaw.com August 1, 2011 Mr. Ken TeKippe Finance Director City of Dubuque 50 West 13th Street Dubuque, Iowa 52001 -4864 Direct Dial: (515)246 -0332 RE: Not to exceed $350,000 Urban Renewal Tax Increment Revenue Notes (Paragon Square Project) Dear Mr. TeKippe: With this letter I am enclosing suggested proceedings to be acted upon by the Council on the date fixed for the hearing on the issuance of the above mentioned Notes, pursuant to the provisions of Code Section 403.9. A certificate to attest the proceedings is also enclosed. These proceedings are prepared to show as a first step the receipt of any oral or written objections from any resident or property owner to the proposed action of the Council to issue the Notes. A summary of objections received or made, if any, should be attached to the proceedings. After all objections have been received and considered if the Council decides not to abandon the proposal to issue the Notes, a form of resolution follows that should be introduced and adopted, entitled "Resolution Instituting Proceedings to Take Additional Action for the Issuance of not to exceed Urban Renewal Tax Increment Revenue Notes." The Council is required by statute to adopt the resolution instituting proceedings to issue the Notes at the hearing -- or an adjournment thereof. If necessary to adjourn, the minutes are written to accommodate that action. STATE OF IOWA COUNTY OF DUBUQUE I, the undersigned, do hereby certify that I am now and was at the times hereinafter mentioned, the duly qualified and acting Clerk of the City. of Dubuque, in the County of Dubuque, State of Iowa, and that as such Clerk and by full authority from the Council of the City, I have caused a NOTICE OF MEETING OF THE COUNCIL OF THE CITY OF DUBUQUE, IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE OF NOT TO EXCEED $350,000 URBAN RENEWAL TAX INCREMENT REVENUE NOTES OF SAID CITY, AND THE HEARING ON THE ISSUANCE THEREOF of which the clipping annexed to the publisher's affidavit hereto attached is in words and figures a correct and complete copy, to be published as required by law in the Telegraph Herald, a legal newspaper published at least once weekly, printed wholly in the English language, published regularly and mailed through the post office of current entry for more than two years and which has had for more than two years a bona fide paid circulation recognized by the postal laws of the United States, and has a general circulation in the City, and that the Notice was published in all of the issues thereof published and circulated on the following date: (SEAL) August 5 , 2011. WITNESS my official signature at Dubuque, Iowa, this 15th day of August , 2011. 00807547 -1 \ 10422 -127 CERTIFICATE ) SS Ci - Clerk, C of Dubuque, State of Iowa (Acting) NOTICE OF MEETING OF THE COUNCIL OF THE CITY OF DUBUQUE, IOWA, ON THE MATTER OF THE PROPOSED ISSUANCE OF NOT TO EXCEED $350,000 URBAN RENEWAL TAX INCREMENT REVENUE NOTES OF SAID CITY, AND THE HEARING ON THE ISSUANCE THEREOF PUBLIC NOTICE is hereby given that the Council of the City of Dubuque, Iowa, will hold a public hearing on the 15th day of August 2011, at 6:30 o'clock P.M., in the Historic Federal Building, 350 West 6th Street, Dubuque, Iowa, at which meeting the Council proposes to take additional action for the issuance of not to exceed $350,000 Urban Renewal Tax' Increment Revenue Notes in order to provide funds to pays costs of aiding in the . planning, undertaking' and carrying out of urban renewal project activities under the authority of Chapter 403 of the Code of Iowa and the Urban Renewal Plan for the Holy Ghost Urban Renewal District, including those costs associated with the funding of economic development grants to Paragon Square, LLC, an Illinois limited liability company, under the terms of a Development Agree- ment between the City of Dubuque and Paragon Square, LLC, as the same may be amended from time to time, and the funding of related reserves and payment of capitalized interest and the costs of issuance of the Atthe above meeting the Council shall receive oral or written objections from any resident or property owner of said City to the above action. After all objections have been received and considered, the Council will at this meeting or at any adjournment thereof, take additional action for the issuance of said Urban Renewal Tax Increment Reve- nue Notes or will abandon. the proposal to issue said obliga- tions. Said hearing and appeals there from 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 bf the Council of Dd'buque, Iowa, as provided - by Section 403.9 of the Code of Iowa. 'Dated this 5th day of August, 2011. Kevin S. Firnstahl Acting City Clerk of • Dubuque, Iowa Notes, 1tys STATE OF IOWA {SS: DUBUQUE COUNTY CERTIFICATION OF PUBLICATION I, Suzanne Pike, a Billing Clerk for Woodward Communications, Inc., an Iowa corporation, publisher of the Telegraph Herald,a newspaper of general circulation published in the City of Dubuque, County of Dubuque and State of Iowa; hereby certify that the attached notice was published in said newspaper on the following dates: August 05, 2011, and for which the charge is $28.43. Subscribed to before me, this 0 day of Notary Public in and for Dubuque County, Iowa, ,20 tt . ary Public in and for Dubuque County, Iowa. JANET K. PAPE Commission Number 199659 My Comm. Exp. DEC 11, 2013 NOTICE AND CALL OF PUBLIC MEETING (This Notice to be posted) Governmental Body: The City Council of Dubuque, Iowa. Date of Meeting: August 15 , 2011. Time of Meeting: 6:30 o'clock P .M. Place of Meeting: Historic Federal Building, 350 West 6th Street, Dubuque, Iowa. PUBLIC NOTICE IS HEREBY GIVEN that the above mentioned governmental body will meet at the date, time and place above set out. The tentative agenda for said meeting is as follows: Not to exceed $350,000 Urban Renewal Tax Increment Revenue Notes. • Public hearing on the issuance. • Resolution instituting proceedings to take additional action. Such additional matters as are set forth on the additional 4 page(s) attached hereto. (number) This notice is given at the direction of the Mayor pursuant to Chapter 21, Code of Iowa, and the local rules of said governmental body. City Clerk, Dub . que, Iowa ( Acting ) 1 The City Council of Dubuque, Iowa, met in Regular session, in the Historic August 15 ,2011 Federal Building, 350 West 6th Street, Dubuque, Iowa, at 6:30 above date. There were present Mayor Roy D. B u o l the following named Council Members: 2 August 15 ,2011 session, in the Historic o'clock P.M., on the in the chair, and Karla Braig, JnyrP Connors, Ric Jones Kevin Lynch, David Resnick, Lynn Sutton Absent: The Mayor announced that this was the time and place for the public hearing and meeting on the matter of the issuance of not to exceed $350,000 Urban Renewal Tax Increment Revenue Notes in order to provide funds to pay costs.of aiding in the planning, undertaking and carrying out of urban renewal project activities under the authority of Chapter 403 of the Code of Iowa and the Urban Renewal Plan for the Holy Ghost Urban Renewal District, including those costs associated with the funding of economic development grants to Paragon Square, LLC, an Illinois limited liability company, under the terms of a Development Agreement between the City of Dubuque and Paragon Square, LLC, as the same may be amended from time to time, and the funding of related reserves and payment of capitalized interest and the costs of issuance of the Notes, and that notice of the proposed action by the Council to institute proceedings for the issuance of said Urban Renewal Tax Increment Revenue Notes had been published pursuant to the provisions of Section 403.9 of the Code of Iowa. The Mayor then asked the Clerk whether any written objections had been filed by any City resident or property owner to the issuance of said Urban Renewal Tax Increment Revenue Notes. The Clerk advised the Mayor and the Council that 0 written objections had been filed. The Mayor then called for oral objections to the issuance of said Urban Renewal Tax Increment Revenue Notes and 0 were made. Whereupon, the Mayor declared the time for receiving oral and written objections to be closed. (Attach here a summary of objections received or made, if any) 3 The Council then considered the proposed action and the extent of objections thereto. Whereupon, Council Member Joyce Connors introduced and delivered to the Clerk the Resolution hereinafter set out entitled "RESOLUTION INSTITUTING PROCEEDINGS TO TAKE ADDITIONAL ACTION FOR THE ISSUANCE OF NOT TO EXCEED $350,000 URBAN RENEWAL TAX INCREMENT REVENUE NOTES," and moved its adoption. Council Member Karla Braig seconded the motion to adopt. The roll was called and the vote was, AYES: Jones, Lynch, Resnick, Sutton NAYS: Braig, Buol, Connors Whereupon, the Mayor declared said Resolution duly adopted as follows: RESOLUTION NO. 282 -11 RESOLUTION INSTITUTING PROCEEDINGS TO TAKE ADDITIONAL ACTION FOR THE ISSUANCE OF NOT TO EXCEED $350,000 URBAN RENEWAL TAX INCREMENT REVENUE NOTES WHEREAS, pursuant to notice published as required by law, this Council has held a public meeting and hearing upon the proposal to institute proceedings for the issuance of not to exceed $350,000 Urban Renewal Tax Increment Revenue Notes for the purpose of pay costs of aiding in the planning, undertaking and carrying out of urban renewal project activities under the authority of Chapter 403 of the Code of Iowa and the Urban Renewal Plan for the Holy Ghost Urban Renewal District, including those costs associated with the funding of economic development grants to Paragon Square, LLC, an Illinois limited liability company, under the terms of a Development Agreement between the City of Dubuque and Paragon Square, LLC, as the same may be amended from time to time, and the funding of related reserves and payment of capitalized interest and the costs of issuance of the Notes, and has considered the extent of objections received from residents or property owners as to said proposed issuance; and, accordingly the following action is now considered to be in the best interests of the City and residents thereof: NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: 4 Section 1. That this Council does hereby institute proceedings and takes additional action for the sale and issuance in the manner required by law of not to exceed $350,000 Urban Renewal Tax Increment Revenue Notes for the foregoing purpose. Section 2. The Economic Development Director and Finance Director are authorized and directed to proceed on behalf of the City with the negotiation of the final terms of said Notes, to . select a date for the Council's approval thereof, to cause to be prepared such notice and sale information as may appear appropriate, to publish and distribute the same on behalf of the City and this Council and otherwise to take all action necessary to permit the sale of said Notes on a basis favorable to the City and acceptable to the Council. ATTEST: PASSED AND APPROVED this 15th day of August , 2011. 5 Mayor /�`