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HomeMy WebLinkAboutWaterloo Development Corporation - Agreement for Debt Payment - 8/11/2014CITY OF WATERLOO, IOWA CITY CLERK AND FINANCE DEPARTMENT 715 Mulberry Street • Waterloo, IA 50703 • (319) 291-4323 Fax (319) 291-4571 Council Communication City Council Meeting: August 11, 2014 Prepared: August 5, 2014 Dept. Head Signature: Number of Attachments: Two SUBJECT: Debt Payment Agreement with Waterloo Development Corporation Submitted by: Mayor Clark Recommended City Council Action: Adopt a resolution approving the Agreement for Debt Payment with the Waterloo Development Corporation for the SportsPlex facility. Summary Statement: As you know, the Waterloo Development Corporation and Rick Young have requested that the City amend the SportsPlex Development and Property Transfer Agreement and the Lease Purchase Agreement to remove the option that currently allows the City to not take ownership of the SportsPlex property at the end of the lease term. This agreement formalizes the commitment that the Waterloo Development Corporation has made to pay any debt balance remaining at the Lease Termination date so that the City would not need to fund any remaining mortgage balance. This agreement has been reviewed by the Ahlers law firm on behalf of the City. The agreement includes a provision that the Waterloo Development Corporation obtain personal guaranties in a form satisfactory to the City. A copy of the form of that guaranty is attached, together with a memo from the Ahlers law firm regarding its enforceability. Expenditure Required: None. Source of Funds: N/A Policy Issue: This document relieves of the City of any potential liability remaining at the Lease Termination date. Alternative: The City could choose to repay any mortgage balance and approve the amendments, or the City could choose not to approve any of the documents. Background Information: None. CITY WEBSITE: www.cityofwaterlooiowa.com WE'RE WORKING FOR YOU! An Equal Opportunity/Affirmative Action Employer AGREEMENT FOR DEBT PAYMENT This Agreement for Debt Payment (the "Agreement") is entered into as of g /7- 2014, by and between the City of Waterloo, Iowa ("City"), and Waterloo Development Corporation ("WDC"). WHEREAS, City and WDC are parties to a certain Development and Property Transfer Agreement dated December 19, 2011, as amended (the "Development Agreement"), providing for WDC's acquisition and development of the real property described therein (the "Property"); and WHEREAS, City and WDC are parties to a certain Lease Purchase Agreement dated April 16, 2012 (the "LPA"), by which, as originally drafted, WDC is leasing to City, and City is leasing from WDC, the Property on the terms set forth therein, which terms include City's right to purchase the Property; and WHEREAS, the City and WDC are contemplating an Amendment to the LPA wherein the City would eliminate the "Put Option" to purchase the Property, making transfer of the Property automatic upon the Lease Termination Date, as defined in the LPA; and WHEREAS, the parties desire to make certain amendments to their commitments to pay project debt and to exercise said purchase right in an effort to obtain a full refund ("Sales Tax Refund") from the Iowa Department of Revenue of sales taxes pail on the sports complex project described in the Development Agreement and LPA("SportsPlex Project"). NOW, THEREFORE, in consideration of the mutual promises exchanged herein, and for other consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Prior to the Lease Termination Date as defined in the LPA, WDC shall discharge and pay in full all "project -related indebtedness" as defined in the LPA, including any interest accrued thereon and fees or charges assessed by the lender in relation thereto and shall obtain from the lender(s) a release or satisfaction of each mortgage or other lien filed for project -related indebtedness against the Property. 2. Concurrently with approval and execution of this Agreement, City agrees to approve and execute amendments to the Development Agreement and the LPA that delete the "Put Option" as described in Article XIII of the LPA and remove the City's opportunity to exercise any right other than to purchase the Property as provided in the LPA. 3. In the event the full Sales Tax Refund is not received within one (1) year of this Agreement, then this Agreement shall be null and void and no such changes shall be made to the Development Agreement and the LPA. WDC agrees to execute amendments to the Development Agreement and the LPA to effect this change. 4. As security for the payment by WDC of all project -related indebtedness as described in Section 1 above, WDC shall obtain sufficient guaranties to guaranty payment in full of the project -related indebtedness to the City by personal guarantors in the community, such guaranties being in form and substance as approved by the City. 5. The LPA, as amended, allows the City the right to retain all Surplus Revenues following transfer of the Property to the City. Surplus Revenues are described as any operating income remaining after subtraction of the current annual operating expenses of the completed Improvements, including amounts budgeted for equipment replacement and other operating reserves at the levels established in the annual budget for the Improvements approved by the City Council and a debt service reserve for the payment at the Lease Termination Date of any outstanding Project -related indebtedness of Developer. Notwithstanding anything to the contrary in the LPA or amendments thereto, all operating income generated in a particular year may be used to offset operating expenses from prior years during which the Project operated at a loss. 6. This Agreement is the entire agreement of the parties concerning the subject matter hereof. It may not be modified or amended without the prior written consent of the parties. This Agreement may be executed in one or more counterparts, each of which, including signed counterparts transmitted by facsimile or other electronic means, shall be deemed an original and all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement for Debt Payment by their duly authorized representatives as of the date first set forth above. CITY OF WATERLOO, IOWA B rnest G. Clark, Mayor ATTEST: By: Suzy Sc s, City Clerk 01036660-1\11310-093 2 WATERLOO DEVELOPMENT CORPO' • ION ,‚'4/s By: Title: /ir.oG a/n1----- GUARANTY AGREEMENT This Guaranty Agreement (the "Agreement") is entered into as of 1 / . , 2014, by and between the Waterloo Development Corporation ("WDC") and Richard C. oung ("Guarantor"). WHEREAS, WDC and the City of Waterloo, Iowa ("City"), are parties to a certain Development and Property Transfer Agreement dated December 19, 2011, as amended (the "Development Agreement"), providing for WDC's acquisition and development of the real property described therein (the "Property"); and WHEREAS, City and WDC are parties to a certain Lease Purchase Agreement dated April 16, 2012 (the "LPA"), by which WDC is leasing to City, and City is leasing from WDC, the Property on the terms set forth therein, which terms include City's right to purchase the Property; and WHEREAS, as an inducement for City to amend the Development Agreement and LPA to eliminate its right to purchase and to substitute therefor an obligation to purchase the Property, in an effort to obtain a full refund ("Sales Tax Refund") from the Iowa Department of Revenue of sales taxes paid on the sports complex project described in the Development Agreement and LPA ("SportsPlex Project"), WDC is making a binding, written commitment to City to pay all "project - related indebtedness" as defined in the LPA, and Guarantor is willing to execute this Agreement to provide additional support to WDC's promise to pay such debt. NOW, THEREFORE, the parties agree as follows: 1. In the event the full Sales Tax Refund is received within one (1) year of this Agreement, then Guarantor unconditionally guarantees the full payment, satisfaction and discharge by WDC of all current "project -related indebtedness" as defined in the LPA, including any interest accrued thereon and fees or charges assessed by the lender in relation thereto, that remain due and payable after WDC has exhausted all other reasonable remedies to pay such indebtedness. The parties acknowledge and agree that City is intended as a third -party beneficiary of the foregoing guaranty. This Agreement is assignable by WDC only with prior written consent of Guarantor, which consent will not be unreasonably withheld. 2. In no event shall Guarantor be responsible for any "project -related indebtedness" that accrues after the date hereof. During the term of this Agreement, WDC shall make all reasonable efforts to pay all current "project -related indebtedness" as expeditiously as possible and prior to incurring any subsequent indebtedness so as to ensure Guarantor's liability under this Agreement is limited to "last dollar in." 3. This Agreement shall terminate when the current "project -related indebtedness" has been paid or the mortgage dated April 1, 2013 and recorded in the Black Hawk County Recorder's Office on July 3, 2013 as Doc. No. 2014-00274 is satisfied, whichever is sooner. 4. This Agreement is the entire agreement of the parties concerning the subject matter hereof and is binding on Guarantor, his personal representatives, heirs and assigns. This Agreement may not be modified or amended without the prior written consent of the parties. This Agreement may be executed in one or more counterparts, each of which, including signed counterparts transmitted by facsimile or other electronic means, shall be deemed an original and all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto have executed this Guaranty Agreement as of the date first set forth above. Richard C. Young 01036664-1\11310-093 2 WATERLOO DEVELOPMENT CORPO' • ION A/4 By: Title: AHLERS COONEY, P.C. 100 COURT AVENUE, SUITE 600 DES MOINES, IOWA 50309-2231 FAx: 515-243-2149 WWW.AHLERSLAW.COM Kristin B. Cooper Direct Diet, KCooper®ahterslaw.com 515.246.0330 August 5, 2014 Via E -Mail — Michelle.WeidneK waterloo-ia.org Michelle C. Weidner; CPA Chief Financial Officer City of Waterloo 715 Mulberry Street Waterloo, IA 50703 RE: Sportsplex Guaranty Dear Michelle, We have reviewed the form of Guaranty Agreement to be used by WDC. We find the Guaranty Agreement to be in acceptable form. The language of the Guaranty Agreement names the City of Waterloo as a third -party beneficiary. ("The parties acknowledge and agree that the City is intended as a third -party beneficiary of the foregoing guaranty.") A third -party beneficiary is not a party to the original contract, but relies on the promises made by the parties for its own benefit. This language allows either WDC or the City to legally enforce the Guaranty Agreement against the Guarantor. Although this guaranty of payment is designed to be executed by an individual, as opposed to a financial institution, we find no reason to question its enforceability. Assuming the individual who executes the guaranty possesses sufficient assets, a personal guaranty from an individual is no less enforceable than a guaranty from a financial institution. As you know, we have not investigated the financial stability or wherewithal of any possible Guarantor, but recommend that the City satisfy itself that any proposed Guarantor possesses sufficient assets to guaranty the obligations it is assuming under the Guaranty Agreement. Please let us know if we can assist further. Very truly yours, Krist4n Billingsley Cooper KBC:cf 01043171-1\11310-093 WISHARO & BAILY - 1888; GUERNSEY & BAILY- 11193; BAILY & STIPP - 1901; STIPP. PERRY. BANNLSTER & STARZINOER -1914; BANNISTER. CARPENTER AHLERS & COONEY -1950; AHLERS. COONEY. DORWEILER, ALLBEE. HAYNIE & SMITH -1974; AHLERS. COONEY. DORWEILER. HAYNIE, SMITH & ALLBEE, P.C. -1990