Progressive Processing, LLC 2nd Amendment to Development AgreementMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
Dubuque
Itabti
NI-AmericaCity
1111 L1
2007 • 2012 • 2013
SUBJECT: Consent Agenda Item #17 - Progressive Processing LLC Second
Amendment to Development Agreement
DATE: March 17, 2014
When the Greater Dubuque Development Corporation and the City were first in
discussions about competing for the Hormel expansion project, it was decided to offer
two years of Tax Increment Financing (TIF) rebate distributed over five years, beginning
in 2021, the end of their current TIF rebate period.
Based on today's assessed values, this would equal a total of $1,342,000,or $268,400
per year. This is what the City Council approved on November 4, 2013.
However, on this issue there was some miscommunication. In the discussions with
Hormel, the offer was described as a 40% rebate of incremental property taxes per year
for five years. Therefore, the Amended Development Agreement submitted to you
tonight for approval is the wording as represented to the company, 40% per year for five
years.
Either way, the payments to the company will not be appreciably different, unless there
is a substantial increase in either the assessed value of the property or of the property
tax rate. This project is not expected to create any new value since it is just better
utilization of their existing space.
I am still respectfully recommending approval of the Second Amendment to
Development Agreement as submitted.
Michael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Maurice Jones, Economic Development Director
2
THE CITY OF
Dui
Masterpiece on the Mississippi
Dubuque
band
AI -America City
r
2007 • 2012 • 2013
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Second Amendment to Development Agreement with Progressive
Processing, LLC
DATE: March 13, 2014
Economic Development Director Maurice Jones recommends City Council approval of a
Second Amendment to the Development Agreement with Progressive Processing, LLC,
in order to provide an additional two years of TIF extended over the course of five years
(at 40% per year), with the requirement of the addition of 91 jobs.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
",'I144 ,,,,,,
Mic ael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Teri Goodmann, Assistant City Manager
Maurice Jones, Economic Development Director
THE CITY OF
Dui
Masterpiece on the Mississippi
Dubuque
katil
All -America City
1111
2007 • 2012 •2013
Economic Development Department
50 West 13th Street
Dubuque, Iowa 52001-4864
Office (563) 589-4393
Fax (563) 589-1733
TTY (563) 690-6678
http://www.cityofdubuque.org
TO: Michael Van Miliigen, City Manager
FROM: Maurice Jones, Economic Development Director
SUBJECT: Second Amendment to Development Agreement with Progressive
Processing, LLC
DATE: March 13, 2014
INTRODUCTION
This memorandum presents for City Council consideration a Resolution to adopt a
Second Amendment to the Development Agreement with Progressive Processing LLC,
in order to provide an additional two years' of TIF extended over the course of five years
(at 40% per year), with the requirement of the addition of ninety-one (91) jobs.
BACKGROUND
City staff has worked with the Greater Dubuque Development Corporation and
Progressive Processing, LLC on an agreement for the expansion of their business at
their facility in the Dubuque Industrial Center West.
The original Development Agreement required an investment of approximately
$89,000,000 and the addition of 196 jobs within two years, which are to be maintained
for ten years.
Progressive Processing, LLC now plans to invest an additional $34,400,000 in
machinery and building improvements. These improvements will bring the processing
of two additional product lines to this facility, as well as 91 new jobs.
DISCUSSION
The proposed Second Amendment to the Development Agreement provides for a
financial incentive to encourage this manufacturing expansion in the form of tax
increment financing (TIF) rebates.
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These rebates will be paid semi-annually between November 1, 2021 and May 1, 2026
in amounts equal to forty percent (40%) of the actual amount of tax increment revenues
collected by the City. Therefore, the amount paid over five years will be equal to two
years' worth of TIF rebate.
Detailed terms and conditions are included within the attached Second Amendment to
the Development Agreement.
RECOMMENDATION/ ACTION STEP
As this Second Amendment supports the City Council's objectives for job creation and
retention, I recommend that the City Council adopt the attached Resolution.
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RESOLUTION NO. 80-14
APPROVING THE SECOND AMENDMENT TO DEVELOPMENT AGREEMENT
BETWEEN THE CITY OF DUBUQUE, IOWA AND PROGRESSIVE PROCESSING,
LLC
Whereas, the City of Dubuque, Iowa (City) and Progressive Processing, LLC
entered into a Development Agreement (the Development Agreement) dated for
reference purposes the 21st day of April, 2008; and
Whereas, the Development Agreement erroneously named Progressive
Packaging, LLC as the Developer, and the correct name of the Developer is
Progressive Processing, LLC; and
Whereas, Progressive Processing, LLC intends to expand its business in
Dubuque by adding equipment to its facility in Dubuque Industrial Center West; and
Whereas, City has agreed to provide Progressive Processing, LLC additional tax
increment finance payments in consideration for its expansion of its business; and
Whereas, City and Progressive Processing, LLC now desire to amend the
Development Agreement as set forth in the Second Amendment to Development
Agreement attached hereto.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
DUBUQUE, IOWA:
1. The Second Amendment to Development Agreement attached hereto is
hereby approved.
2. The Mayor is hereby authorized and directed to sign the Second Amendment
to Development Agreement on behalf of the City of Dubuque.
Passed, approved and adopted this 17th day of Mach, 2014.
Roy D.ol, Mayor
Attest:
SECOND AMENDMENT
TO
DEVELOPMENT AGREEMENT
BETWEEN
THE CITY OF DUBUQUE, IOWA
AND
PROGRESSIVE PROCESSING, LLC
This Second Amendment to Development Agreement, dated for reference
purposes the //'day of,,/I1/ , 2014, is made and entered into by the City
of Dubuque, Iowa, a municipality (City), established pursuant to the Iowa Code and
acting under authorization of Iowa Code Chapter 403, as amended (the Urban Renewal
Act), and Progressive Processing, LLC, a Delaware corporation with its principal place
of business in Austin, Minnesota (Developer), incorrectly named as Progressive
Packaging, LLC in the Development Agreement.
WHEREAS, City and Developer previously entered into a Development
Agreement dated April 21, 2008 (the Development Agreement); and
WHEREAS, Section 2.1 of the Development Agreement provides for a minimum
investment of approximately $89,000,000.00 in facility construction, site work and
equipment on the real estate which is the subject of the Development Agreement (the
Property); and
WHEREAS, City and Developer desire to further amend the Development
Agreement as set forth herein.
NOW THEREFORE, in consideration of the mutual terms and covenants
contained herein, City and Developer agree as follows:
1. Section 2.1 of the Development Agreement is hereby amended to read as
follows:
2.1 Required Minimum Improvements.
(1) City acknowledges that Developer is building a manufacturing facility on
the Property, specifically, a building and certain internal systems thereto, and
including, without limitation, all interior improvements (the Original Minimum
Improvements), all as more particularly depicted and described on the plans and
specifications to be delivered to and approved by City as contemplated in this
Agreement. Developer hereby agrees that the Original Minimum Improvements
shall include a manufacturing facility with approximately three hundred twenty
seven thousand (327,000) square feet of floor space, along with necessary site
work and equipment as contemplated in this Agreement, at an estimated cost of
approximately $89,000,000.
030414ba1
(2) Developer agrees to make additional Minimum Improvements of
$34,400,000.00 in machinery and building improvements (the Additional
Minimum Improvements).
(3) The Original Minimum Improvements and the Additional Minimum
Improvements are referred to herein collectively as the Minimum Improvements.
2. Section 2.3 of the Development Agreement is hereby amended to read as
fol lows:
2.3 Timing of Improvements.
(1) Developer hereby agrees that construction of the Original Minimum
Improvements on the Property shall be commenced within three (3) months after
the Closing Date, and shall be substantially completed by December 31, 2009.
For purposes of this section, "substantial completion" shall mean completion of
the site work and completion of the core and shell of the building, but shall not
include fixtures and equipment, and does not contemplate receipt of a certificate
of occupancy.
(2) The Additional Minimum Improvements shall be substantially completed
by June 1, 2018.
(3) 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
delays. The time for performance of such obligations shall be extended only for
the period of such delay.
3. Section 3.2(1) of the Development Agreement is hereby amended to read
as follows:
(1) For and in consideration of Developer's obligations hereunder, and in
furtherance of the goals and objectives of the Urban Renewal Plan for the Project
Area and the Urban Renewal Law, City agrees, subject to Developer being in
compliance with the terms of this Agreement as follows:
(a) To make twenty (20) consecutive semi-annual payments (such
payments being referred to collectively as the Economic Development
Grants) to Developer if Developer owns or leases the Property and/or the
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Minimum Improvements thereon during the period such tax increment
revenues accrue, as follows:
November 1, 2011
November 1, 2012
November 1, 2013
November 1, 2014
November 1, 2015
November 1, 2016
November 1, 2017
November 1, 2018
November 1, 2019
November 1, 2020
May 1,2012
May 1,2013
May 1,2014
May 1, 2015
May 1,2016
May 1,2017
May 1,2018
May 1,2019
May 1, 2020
May 1, 2021
The foregoing Economic Development Grants will be made pursuant to
Iowa Code Section 403.9 of the Urban Renewal Law in amounts equal to
the actual amount of tax increment revenues collected by City under Iowa
Code Section 403.19 (without regard to any averaging that may otherwise
be utilized under Iowa Code Section 403.19 and excluding any interest
that may accrue thereon prior to payment to Developer) during the
preceding six-month period in respect of the Property and Minimum
Improvements constructed by Developer (the Developer Tax Increments).
(b) To make ten (10) consecutive semi-annual payments (such
payments being referred to collectively as the Economic Development
Grants) to Developer if Developer owns or leases the Property and/or the
Minimum Improvements thereon during the period such tax increment
revenues accrue, as follows:
November 1, 2021
November 1, 2022
November 1, 2023
November 1, 2024
November 1, 2025
May 1, 2022
May 1, 2023
May 1, 2024
May 1, 2025
May 1, 2026
The foregoing Economic Development Grants will be made pursuant to
Iowa Code Section 403.9 of the Urban Renewal Law in amounts equal to
forty percent (40%) of the actual amount of tax increment revenues
collected by City under Iowa Code Section 403.19 (without regard to any
averaging that may otherwise be utilized under Iowa Code Section 403.19
and excluding any interest that may accrue thereon prior to payment to
Developer) during the preceding six-month period in respect of the
Property and Minimum Improvements constructed by Developer (the
Developer Tax Increments).
Developer recognizes and agrees that the Economic Development Grants shall
3
be paid solely and only from the incremental taxes collected by City in respect to
the Property and Minimum Improvements, which does not include property taxes
collected for the payment of bonds and interest of each taxing district, and taxes
for the regular and voter -approved physical plant and equipment levy, and any
other portion required to be excluded by Iowa law, and thus such incremental
taxes will not include all amounts paid by Developer as regular property taxes.
4. Section 4.1 of the Development Agreement is hereby amended to read as
follows:
(1) Developer shall create ninety-one (91) full-time jobs in Dubuque, Iowa,
prior to June 1, 2018, and shall maintain those jobs during the term of this
Agreement. It is agreed by the parties that the Developer has two hundred one
(201) full-time positions in Dubuque, Iowa, as of January 1, 2014. In the event
that the certificate provided to City under Section 4.2 hereof on January 1, 2026
discloses that Developer does not as of that date have at least 292 employees as
provided hereinabove, then Developer shall pay to City, promptly upon written
demand therefore, an amount equal to $ 10,158.00 per job not created or
maintained ($2,966,250.00 divided by 292 jobs = $ 10,158.00). The payments
provided for herein shall be City's sole remedy for the failure of Developer to
meet the job creation requirements of this Section 4.1(1).
(2) In addition, for the positions that Developer fails to create and maintain:
(a) For any year from 2018 to and including 2021, the semi-annual
Economic Development Grants for such year under Section 3.2 shall be
reduced by the percentage that the number of such positions bears to the
total number of positions required to be created and maintained (292 jobs)
by this Section 4.1. (For example, if Developer has 250 jobs, the semi-
annual Economic Development Grants would be 85.62% (250/292
employees) of the available Developer Tax Increment received by City).
The reduction of the semi-annual Economic Development Grants shall be
City's sole remedy for the failure of Developer to meet the job creation
requirements of Section 4.1(1) for such years.
(b) For any year from 2022 to and including 2026, the semi-annual
Economic Development Grants for such year under Section 3.2 shall be
reduced by the percentage that the number of such positions bears to the
total number of positions required to be created and maintained (292 jobs)
by this Section 4.1 times forty percent (40%). (For example, if Developer
has 250 jobs, the semi-annual Economic Development Grants would be
85.62% (250/292 employees) x 40% of the available Developer Tax
Increment received by City). The reduction of the semi-annual Economic
Development Grants shall be City's sole remedy for the failure of
Developer to meet the job creation requirements of Section 4.1(1) for such
years.
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5. Except as modified herein, the Development Agreement shall remain in
full force and effect.
CITY OF DUBUQUE, IOWA PROGRESSIVE PROCESSING, LLC
By: 1 �2 �-f
Y By: ,D4r4,/ lw
Roy . Buol, Mayor Roland G. Gentzl , Treasurer
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