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Franklin Investments_Amendment to Development Agreement for 39 Bluff St.THE CITY OF Dui Masterpiece on the Mississippi Dubuque kital All- America City II 111! 2012 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: First Amendment to Development Agreement with Franklin Investments, LLC DATE: April 30, 2013 Economic Development Director Dave Heiar recommends City Council approval of the First Amendment to the Development Agreement with Franklin Investments, LLC for redevelopment of the property located at 39 Bluff Street. This amendment includes $20,000 of additional downtown housing incentives and an additional $10,000 for financial consultant assistance. When the Development Agreement was originally approved, the City did not provide incentives for apartments that were less than 650 sq. ft. Therefore, two of the residential units were not included in the incentive package. This project helped to demonstrate the need to modify that guideline. Based on the demand for smaller market rate units in the downtown area, these apartments were among the first to be occupied. I concur with the recommendation and respectfully request Mayor and City Council approval. kr,„709,-, Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager David J. Heiar, Economic Development Director Masterpiece on the Mississippi TO: Michael Van Milligen, City Manager FROM: David J. Heiar, Economic Development Director SUBJECT: First Amendment to Development Agreement with Franklin Investments, LLC DATE: April 30, 2013 Dubuque knetril All-America City 1 2007 INTRODUCTION On April 4th, 2011 the City Council approved a Development Agreement with Franklin Investments, LLC. This memorandum presents for City Council consideration a Resolution approving the 1st amendment to the Development Agreement on the property located at 39 Bluff Street in downtown Dubuque. BACKGROUND City staff had worked with Franklin Investments, LLC to formulate a funding package to redevelop the property located at 39 Bluff Street. Franklin Investments, LLC has invested over $1,750,000 in redeveloping 39 Bluff Street to include creating 21 apartments for market -rate rental. The approved Development Agreement provided for incentives to encourage redevelopment of the property. The key elements of the Development Agreement included the following: 1) Up to $190,000 in incentives through the Downtown Housing Incentive Program. 2) A 15 year TIF rebate in the form of a yearly tax rebates on the value of the assessable improvements (increased valuation). 3) Developer will spend at least $1,750,000 to create 21 market -rate residential units on Bluff Street and shall be substantially completed by December 31, 2011. The Council also approved a letter of commitment with the following incentives: 4) Downtown Rehabilitation Loan of $300,000 5) Design Grant for $10,000 6) Facade Grant of $10,000 7) Financial Consultant Grant of $5,000 DISCUSSION When the Development Agreement was originally approved, the City did not provide incentives for apartments that were less than 650 sq. ft. Based on the original floor plans, two of these units were less than 650 sq. ft. Therefore, these 2 units were not included in the incentive package. The project is now complete and the developers have requested an additional $20,000 for those units that were not previously included. The as -built floor plans indicate that one of the units now meets the minimum requirements with 659 sq. ft. The remaining unit is only 606 sq. ft., however, this project helped to demonstrate the need to modify that guideline. Based on the demand for smaller market rate units in the downtown area, these apartments were among the first to be occupied in the Franklin Project. The Council has since approved a change to this guideline which now states: Units smaller than 650 square feet will not be eligible for this project, unless the project meets the guidelines for Federal or State Historic Tax Credits and is a self- contained unit with a private bathroom and kitchen facility. The smallest unit in the Franklin Investments, LLC project meets this criteria. Based on the quality of this finished project and based on the change to the City's guidelines, it seems appropriate to amend our development agreement to aid the developer on this project to narrow the financing gap. When the City Council approved a letter of commitment for additional incentives, the developer requested $5,000 for a financial consultant grant, even though the allowable upper limit for this grant is $15,000. Since this was the developer's first project involving historic tax credits, the developer was not aware of the complexity and amount of paperwork required in this process, and has asked the City to allow for the additional funding that had not been previously requested. The financial consultant grant does require a dollar for dollar match from the developer. RECOMMENDATION I recommend that the City Council approve the 1st amendment to the Development Agreement which includes $20,000 of additional downtown housing incentives and an additional $10,000 for financial consultant assistance. ACTION STEP The action step for the City Council is to adopt the attached Resolution. F: \USERS \Econ Dev \Franklin School \20130430 MEMO 1st Amend Franklin Investments DA.doc Prepared /Return to: David Heiar, Economic Development, 50 W. 13th Street, Dubuque, IA 52001 (563) 589 -4393 RESOLUTION NO. 148 -13 RESOLUTION APPROVING THE FIRST AMENDMENT TO THE FRANKLIN INVESTMENTS, LLC DEVELOPMENT AGREEMENT Whereas, a Development Agreement (the Agreement), dated April 4, 2011, was entered into by and between the City of Dubuque, a municipal corporation of the State of Iowa (City), and Franklin Investments, LLC (Developer); and Whereas, City and Franklin Investments, LLC now desire to amend the Development Agreement as set forth attached First Amendment. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the First Amendment of the Franklin Investments, LLC Development Agreement is hereby approved. Section 2. That the Mayor is hereby authorized and directed to execute said First Amendment on behalf of the City of Dubuque and the City Clerk is authorized and directed to attest to his signature. Section 3. That the City Manager is authorized to take such actions as are necessary to implement the terms of the First Amendment as herein approved. Passed, approved and adopted this 6th day of May, 2013. Attest: Kevin ' irnstahl, City Cler Roy D. Buol, Mayor F: \USERS \Econ Dev \Franklin School \Development Agreement \1 st Amendment\20130430 Resolution 1st Amendment Franklin Investments.doc FIRST AMENDMENT TO DEVELOPMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE AND FRANKLIN INVESTMENTS, LLC The First Amendment to Development Agreement, dated for reference purposes the 6th day of May, 2013, is made and entered into by and between the City of Dubuque, Iowa (City) and Franklin Investments, LLC (Developer). Whereas City and Developer previously entered into a Development Agreement dated the 4th of April, 2011 (the Development Agreement); and Whereas the Development Agreement provides in Section 2.1 for Minimum Improvements less than one million seven hundred fifty thousand dollars ($1,750,000) to improve the Property creating twenty one (21) apartments for market -rate rental; and Whereas City and Developer have agreed to amend the Development Agreement to revise the downtown housing grant and the financial consultant grant; and Whereas the parties desire to amend the Development Agreement to set forth such amendment in writing. THEREFORE, in consideration of the mutual terms and covenants contained herein, the parties agree as follows: 1. Section 3.6 (1) of the Development Agreement is hereby amended to read as follows: 3.1 Downtown Housing Incentive (1) City agrees to provide to Developer, on the terms and conditions set forth herein, a grant in the amount of Two Hundred Ten Thousand Dollars ($210,000.00) (the Grant) which shall be funded solely and only from available Downtown Incentive Program funds. 2. The following section will be added to the Development Agreement 3.7 Financial Consultant Grant. City agrees to provide a grant not to exceed fifteen thousand dollars ($15,000) to reimburse Developer for documented costs related to hiring a financial consultant to evaluate the Project's feasibility. Such funds will be disbursed only on completion of the Minimum Improvements, documents of costs and an inspection of the completed Project at a rate of $.50 for each $1.00 of costs incurred. CITY OF DUBUQUE, IOWA Franklin Investments, LLC By: By: Q°Yjej Roy D. diol, Mayor By:' arn.r, Managing Member F:\USERS\Econ Dev\Franklin School\Development Agreement\1st Amendment\20130430 - 1st Amendment Franklin Investment DA.doc