Museum of Art Forgive Debt Request
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MEMORANDUM
June 28, 2006
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Dubuque Museum of Art Loan Request
The Dubuque Museum of Art has submitted a request for the City to forgive the debt
they owe the City from a $300,000 loan they took out in July 1999 from the Downtown
Loan Pool to rehabilitate the Dubuque Museum of Art building.
I think approving this request would set a dangerous precedent. The Downtown Loan
Pool depends mainly on loan repayments to finance future loans, even though there are
also direct appropriations of downtown tax increment financing revenues that
sometimes capitalize the fund.
The program already has significant forgiveness components with grants of $10,000 for
fac;:ade improvements, $10,000 for architectural and engineering fees, and $2,000 for
each job or housing unit created. Also, the program is a 20-year loan at below-market
interest rates with interest-only payments for the first five years.
The Dubuque Museum of Art requested a one-year deferral on interest payments in
April 2003. The City Council agreed to the deferment with interest payments due May 1
and June 1, 2005, and principal plus interest payments to commence July 1, 2004. An
additional request to defer came in April 2004, which was granted by City council
authorizing deferment until July 1, 2006, with a balloon payment of $52,713.60 due at
that time to "catch up" the deferred payments. The due date of that balloon payment
has triggered this request.
As a compromise, I would suggest that the unpaid principal be amortized over the
remaining life of the loan at the same interest rate.
This is affordable for the City at this time because the City will not need to pay Platinum
Hospitality, the management firm for the Grand River Center, the budgeted subsidy
payment for this year. That payment is not being claimed because the losses for the
Grand River Center have not exceeded the agree-upon threshold.
To go any further than this would be problematic because the Platinum Building is
waiting on their Downtown Loan Pool loan for their project, along with three other
important projects, which include the Fischer Company project in the old Betty Jane's
building, the Silver Dollar building, and another economic development project.
I respectfully request Mayor and City Council approval of the change in the loan
agreements for not-for-profit entities.
(1 ~)A t(V1, pJL-
Michael C. Van Milligen
MCVM/ksf
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
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70 I Locust Street
Dubuque, Iowa 52001
P 563557, 1851
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Dubuque Museum of Art
June 28, 2006
The Honorable Mayor and City Council Members
City of Dubuque
City Hall
Dubuque, IA 52001
Honorable Mayor and City Council Members:
I appreciate your willingness to consider options to settle the remaining debt the
Dubuque Museum of Art owes the City from a $300,000 loan to rehabilitate the
Museum's present facility,
Under present terms, a $52,713,60 balloon payment is due July 21,2006, After
discussing the Museum's present financial needs with Mike Van Milligen, he
agreed to present a recommendation for alternative terms to satisfy the debt In
his memo to you dated June 28, Mike recommended that the unpaid principal
on the loan be amortized over the remaining life of the loan's 15-year
amortization, Under this recommendation, the Museum's annual payment on
the loan would be approximately $2,337,
While we are certainly grateful for this recommendation, we respectfully ask you
to consider several other options that would provide additional support to the
Museum:
1, Extend the amortization of the loan over an additional five years, This would
reduce the Museum's annual payment to $1,805, While this may not seem
like a significant reduction in monthly payments, it certainly would be
meaningful to the Museum,
2, Forgive the unpaid principal balance of the loan, If the City could find a way
to forgive the debt, it would make a great statement about Dubuque's
commitment to the Arts,
Thank you for your past support of the Museum, and for considering our
request