Cottingham & Butler Expansion Memorandum of Understanding
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MEMORANDUM
August 16,2006
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Proposed Memorandum of Understanding with Cottingham & Butler
Economic Development Director David Heiar is recommending the approval of a
Memorandum of Understanding with Cottingham & Butler concerning the expansion of
Cottingham & Buller in downtown Dubuque, with significant renovations of both the
Security Building located at 151 West 8th Street and the former House of China building
located at 803 Main Street.
The Company would invest approximately $4,650,000 in rehabilitation of the two
buildings and add 90 full-time positions.
The Memorandum of Understanding includes:
1. Enterprise Zone benefits;
2. State and Federal Historic Tax Credits;
3. State of Iowa Community Economic Betterment Account (CEBA) assistance;
4. A Community Development Block Grant forgivable loan in the amount of
$319,000;
5. Downtown Rehabilitation Loan and Grant Program participation; and
6. A 10 year property tax rebate on any new value.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
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Michael C. Van Milligen
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Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
David J. Heiar, Economic Development Director
CITY OF DUBUQUE, IOWA
MEMORANDUM
August 15, 2006
TO: Michael Van Milligen, City Manager
FROM: David J. Heiar, Economic Development Department 'lJQtt
SUBJECT: Proposed Memorandum of Understanding with Cottingham & Butler
INTRODUCTION
The attached resolution provides for the approval of a Memorandum of Understanding
between the City and Cottingham & Butler concerning the expansion of Cottingham &
Butler in downtown Dubuque.
DISCUSSION
Cottingham & Butler is an insurance advisor and service provider headquartered in
Dubuque. The Company has regional offices located throughout the United States and
has been in business since 1887. Cottingham & Butler is the 57th largest insurance
broker in the United States and has over 2,000 clients. The Company does business in
over 40 states and has had a 15% average growth per year over the last 20 years.
In order to keep the Company's current employment downtown, and encourage
additional employment, an incentive package has been offered to the company to
expand Downtown, subject to City Council approval. The company plans to add 90 full
time jobs within 2 years of the closing of the downtown rehabilitation loan, and invest
approximately $4,650,000 in the rehabilitation of the two buildings.
Cottingham & Butler plans to rehabilitate the 1st floor fac;:ade of the Security Building to
restore it to it's grandeur of yesteryears. The Company also plans to restore the high
ceiling on the first floor and the open balcony that the Stampfer's Department Store had
for so many years, and renovate the full east side of the building. The initial cost
estimate for this renovation project is approximately $4.0 million.
In addition, Cottingham & Butler plans to renovate the House of China building located
at 803 Main Street. This 5,800 sq. ft. building would be renovated at an estimated cost
of $650,000 and would include additional office space for Cottingham & Butler
employees and may include a public restaurant.
The attached Memorandum of Understanding outlines the Company's plans, and details
the incentive package proposed by the City. The incentives include Enterprise Zone
benefits, a CDBG forgivable loan, Historic Tax Credits, CEBA, Job Training funds, TIF
Downtown Rehabilitation Loans and Grants, and a rebate of property taxes on new
value added for a period of ten years.
The implementation of the Memorandum of Understanding will include the following
steps:
1. The preparation and approval of an application for Enterprise Zone
Benefits, and the approval of a contract between the Iowa Department of
Economic Development, the Company, and the City Council.
2. Applications for State and Federal Historic Tax Credits.
3. An application for Iowa New Job Training Program.
4. Approval of an application for a CEBA low interest loanlforgivable loan.
5. The preparation and approval of a $319,000 CDBG forgivable loan to the
company. This application process would require an environmental
assessment and require Davis Bacon wages for this building project.
6. The preparation and approval of loan documents for the Downtown
Rehabilitation Loan and Grant program. Some exceptions to the City's
current Downtown Loan Pool policies would have to be granted to approve
these loans/grants. Currently the policy only allows one $300,000 loan per
building. The Security Building received a $300,000 loan in the spring of
2002 as part of a previous renovation project. In addition, fa<;:ade grants
have been targeted to lower Main Street. These buildings are outside of
this targeted area and therefore would require an exception to the City's
guidelines. These exceptions can be justified for two reasons. First, the
size of the building, and the magnitude of the rehabilitation projects are
much greater than many other renovation projects. Second, and more
importantly, the creation of 90 new jobs is a phenomenal benefit to the
downtown and the community.
It should be noted that all the available funds in the downtown loan pool
are currently committed to other projects until FY 2009. If the loan pool is
recapitalized in the FY 2008 budget, it is possible to close on one of these
loans prior to FY 2009. If no new funds are provided to recapitalize this
loan pool, and if all current loan payments are received on time, these two
loans would commit our loan pool resources until FY 2011.
7. Approval of a TIF agreement which would rebate property taxes on the
incremental valuation associated with these rehabilitation projects. The
agreement would prorate the rebate if the Company does not create 90
new positions.
RECOMMENDATION
I recommend the City Council review, discuss, and approve the Memorandum of
Understanding.
ACTION STEP
The requested action is for the City Council to adopt the attached resolution approving
the Memorandum of Understanding, and instructing the City Manager to prepare the
appropriate documents for City Council approval of the incentive package.
F:IUSERSIDHeiar\Coltingham & Butler\Council Memo for MOU.doc
August21,2006
MEMORANDUM OF UNDERSTANDING
Whereas, Cottingham & Butler, a Dubuque based insurance advisor and service
provider, has determined that an expansion of its facilities in Dubuque is in the best
interests of the Company; and
Whereas, Cottingham & Butler has investigated sites in other communities and in
"downtown" Dubuque for said expansion; and
Whereas, the City of Dubuque is encouraging the Company to expand in downtown,
and is willing to discuss incentives for a "downtown" location; and
Whereas, the City of Dubuque and Cottingham & Butler desire to enter into further
discussions concerning a location downtown, as a first step in the Company's efforts to
initiate the expansion, the parties propose the following:
1. Cottingham & Butler (the Company) will make improvements and equip existing
commercial buildings located at 151 West 8th Street (Security Building) and 803
Main Street (House of China Building). The Company will make a capital
investment in building improvements, equipment, furniture and fixtures of
approximately $4,000,000 in the Security Building and not less than $650,000 at
803 Main Street.
2. As of June 30, 2006, the Company had 311 community based employees. The
Company will maintain these existing employees in Dubuque, Iowa, and
proposes to create not less than ninety (90) new full time jobs within two (2)
years of the closing of the loan.
3. In consideration for the Company's intentions as described in Paragraphs 1. and
2., and as an incentive for expanding downtown, the City will provide the
following incentive package to the Company:
. Enterorise Zone Benefits: Subject to the Company meeting the
requirements of the program, approval by the Dubuque Enterprise Zone
Commission and State of Iowa approval of the Company's application, the
City will execute a three party Enterprise Zone Agreement with the State
and the Company, pursuant to which the Company would be eligible for
benefits under the program. These benefits include a refund of sales and
use tax charged for materials in the renovation of the building, extra
training funding, and an Iowa State tax credit equal to 10% of the
Company's investment in the project.
· Tax Credits: The Company intends to apply for Federal and State Historic
Tax Credits. Federal Tax Credits can be for 20% of the project costs.
State Tax Credits can be for 25% of the project cost.
· Iowa New Job Trainino Prooram: An application will be submitted to NICC
for 1.5% of the wages paid to qualifying employees to be used for training
purposes.
· CEBA: The Company intends to make an application to the Iowa
Department of Economic Development for a low interest loanlforgivable
loan. This application will need City Council approval prior to submittal.
· CDBG Commercial/Industrial Rehabilitation Foroivable Loan. Subject to
approval of loan documents, and appropriate loan and security
agreements, and approval of the Community Development Advisory
Commission, the City will provide a $319,000 Community Development
Block Grant (CDBG) forgivable loan to the Company.
· Tax Increment Financino Downtown Rehabilitation Loans and Grants:
Subject to a written agreement executed between the Company and the
City, the City will provide the following;
151 West 8th Street (Security Building)
$ 1 0,000 fa~ade grant
$ 10,000 design grant
$300,000 rehabilitation loan
803 Main Street (House of China Building)
$ 10,000 fa~ade grant
$ 10,000 design grant
$300,000 rehabilitation loan
The first 5 years of the loans are interest only payments. Interest rate is
3%. Principal and interest payments begin in year 6 and the principal is
amortized over 15 years. At each location a $2,000 credit is given for
every job created within two years of the closing of the loan and
maintained for a three year period.
· Tax Increment Financino Rebate: Subject to City Council approval of all
the requirements of the Urban Renewal Act (Chapter 403 of the Code of
Iowa), and subject to a written agreement executed between the Company
and the City after the requirements have been met by the City, the City will
provide a ten year rebate of property taxes paid by the Company on the
incremental value added to both real estate parcels as a result of the
project.
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4. The Company acknowledges that in order for the City to secure such incentives,
certain requirements are imposed upon the Company as specified in the
respective program regulations. The Company agrees to cooperate with the
City, the State of Iowa, and the United States Department of Housing and Urban
Development by providing the information and documents necessary for the
approval of loans and applications for financial assistance above.
5. Notwithstanding any other provision of this Memorandum of Understanding, the
City shall have no obligation to the Company under this Memorandum of
Understanding until and unless definitive agreements are entered into between
the Company and the City, and approved by the City Council and the Company's
appropriate officers.
Approved this 21st day of August 2006 by and between Cottingham & Butler, and the
City of Dubuque, Iowa.
COTTINGHAM & BUTLER
CITY OF DUBUQUE
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Jo E. utler, hairman & CEO
Roy D. Buol, Mayor
Attest: 1Jt:if1-r.d-fL!/tJP/f./----
I
Jeanne F. Schneider, City Clerk
F:\USERS\DHeiar\Cotlingham & Butler\MEMO of UNDERSTANDING. doc
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RESOLUTION NO. 398-06
A RESOLUTION APPROVING A MEMORANDUM OF UNDERSTANDING WITH
COnlNGHAM & BUTLER FOR AN EXPANSION IN DOWNTOWN DUBUQUE
Whereas, Cottingham & Butler is proposing to expand employment in the City of
Dubuque,and
Whereas, the City is encouraging the Company to expand its operations in Downtown
Dubuque, and
Whereas, a Memorandum of Understanding has been prepared for said expansion,
NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF DUBUQUE,
IOWA, AS FOllOWS:
Section 1. The attached Memorandum of Understanding is hereby approved.
Section 2. The City Manager is hereby directed to prepare documents necessary to
implement the Memorandum of Understanding
Passed, approved and adopted this 21st day of August 2006.
Roy D. Buol, Mayor
ATTEST:
Jeanne F. Schneider, City Clerk
F:\USERS\DHeiar\Catlingham & Butler\Resolution MOA.doc