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HomeMy WebLinkAbout09585 ORDINANCE NO. 9585 AN ORDINANCE APPROVING AN EMPLOYMENT AGREEMENT BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION AND INDIEDWELL COLORADO, A COLORADO NONPROFIT CORPORATION RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE MAYOR TO EXECUTE SAID EMPLOYMENT AGREEMENT AND TRANSFERRING $1,636,800 FROM THE 1992-2021 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECTS FUND BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The City Council finds and determines that the expenditure of $1,636,800 for a new job creating capital improvement project with indieDwell Colorado, a Colorado nonprofit corporation (the “Company”) described in the attached Employment Agreement, is for a public purpose and in furtherance of a municipal function and will create employment opportunities justifying the expenditure of public funds. SECTION 2. The Employment Agreement dated November 11, 2019 between the City and the Company, a copy of which is attached hereto and incorporated herein by this reference, having been approved as to form by the City Attorney, is hereby approved. The Mayor is authorized to execute and deliver said Employment Agreement in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 3. Funds in the aggregate amount of $1,636,800 are hereby authorized to be transferred, expended and made available out of the 1992-2021 Sales and Use Tax Capital Improvement Projects Fund for the sole purpose of the job creating capital improvement project authorized herein and in the manner described in the attached Employment Agreement. The funds are hereby authorized to be transferred and expended and shall be released, disbursed and paid by the City’s Director of Finance as specified in the attached Employment Agreement. SECTION 4. The officers and staff of the City are authorized and directed to perform any and all acts consistent with this Ordinance and the attached Employment Agreement which are necessary or appropriate to implement transactions described therein. SECTION 5. This Ordinance shall become effective on the date of final action by the Mayor and City Council. Action by City Council: Introduced and initial adoption of Ordinance by City Council on October 28, 2019. Final adoption of Ordinance by City Council on November 11, 2019 . President of City Council Action by the Mayor: ☒ Approved on November 14, 2019 . □ Disapproved on based on the following objections: Mayor Action by City Council After Disapproval by the Mayor: Council did not act to override the Mayor's veto. ☐ Ordinance re-adopted on a vote of , on ☐ ☐ Council action on __________________failed to override the Mayor’s veto. President of City Council ATTEST City Clerk City Clerk’s Office Item # R-1 Background Paper for Proposed Ordinance COUNCIL MEETING DATE: October 28, 2019 TO: President Dennis E. Flores and Members of City Council CC: Mayor Nicholas A. Gradisar VIA: Brenda Armijo, City Clerk FROM: Daniel C. Kogovsek, City Attorney SUBJECT: AN ORDINANCE APPROVING AN EMPLOYMENT AGREEMENT BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION AND INDIEDWELL COLORADO, A COLORADO NONPROFIT CORPORATION RELATING TO A JOB CREATING CAPITAL IMPROVEMENT PROJECT, AUTHORIZING THE MAYOR TO EXECUTE SAID EMPLOYMENT AGREEMENT AND TRANSFERRING $1,636,800 FROM THE 1992-2021 SALES AND USE TAX CAPITAL IMPROVEMENT PROJECTS FUND SUMMARY: Attached is an Ordinance approving and authorizing the Mayor to sign an employment agreement with indieDwell Colorado, a Colorado nonprofit corporation (the “Company”). PREVIOUS COUNCIL ACTION: Not applicable to this Ordinance. BACKGROUND: Company’s business plan is centered on the manufacture of new low-cost homes, by recycling shipping containers, for distribution outside of Pueblo County. The Company has committed to invest more than Thirteen Million Dollars ($13,000,000) in a manufacturing facility located within the City at 205 N. Elizabeth Street (the former AG Warehouse). The Company has also committed to employ a minimum of 171 full-time employees at its facility whose annual pre-benefit salaries shall average at least $38,248 for a period of seven (7) years. FINANCIAL IMPLICATIONS: In exchange for the Company’s employment commitment, the City will advance funds in the amount of $1,636,800.00 for the following purposes: a. $310,892 for the purchase of equipment to be used and installed at the Company’s facility or for construction costs for improvements at the facility; and b. A rent reimbursement subsidy in the amount of $1,189,108; and c. $136,800 for the purpose of providing pre-employment training of the Company’s prospective employees at Pueblo Community College. The advancement of funds by the City shall be secured by a perfected first security interest in the Company’s equipment purchased with City funds. BOARD/COMMISSION RECOMMENDATION: Not applicable to this Ordinance. STAKEHOLDER PROCESS: Not applicable to this Ordinance. ALTERNATIVES: If this Resolution is not approved, the Company will not open its manufacturing facility in the City of Pueblo. RECOMMENDATION: The Pueblo Economic Development Corporation recommends approval of this Resolution. Attachments: Proposed Ordinance and proposed Employment Agreement EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of this 11th day of November, 2019, between the City of Pueblo, a Colorado municipal corporation (the "City"), and indieDwell Colorado, a Colorado nonprofit corporation (the "Company"). The Company and the City are referred to collectively in this Agreement as the "Parties" and individually, without differentiation, each as a"Party." WHEREAS,the Company has expressed a willingness to establish a manufacturing center and business administration offices in the City of Pueblo, and in furtherance thereof has, through the Pueblo Economic Development Corporation, made application for economic development funds from the City; and WHEREAS,the City has approved such application and will make economic development funds available to Company subject to and upon the terms and conditions of this Agreement; and WHEREAS, Company's business plan, as it pertains to Pueblo County, is centered on the manufacture of new low-cost homes for distribution outside of Pueblo County by recycling shipping containers ("Company's Business"), and WHEREAS, the City has determined that Company's Business will create primary jobs and will not materially and substantially compete with any existing activity or business within the City; and WHEREAS, in connection with its application, the Company has committed to: (i) invest not less than Thirteen Million Dollars ($13,000,000.00) in a manufacturing facility located within the City at 205 N. Elizabeth Street (the former AG Warehouse); and (ii) provide the employment described in Section 4 of this Agreement. NOW, THEREFORE, in consideration of the foregoing and mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows: 1. The following terms as used in this Agreement shall have the following meaning unless the context clearly indicates otherwise: "Effective Date"means the date of approval of this Agreement by City Council of City. "Employment Commitment Date" means October 1, 2022. "Equipment" means the manufacturing machinery and trade fixtures and other related personal property to be acquired with City funds and then installed, maintained, and used by Company in the Facility. "Facility" means the manufacturing center and business administration offices located at 205 N. Elizabeth Street, Pueblo, CO 81003, wherein Company will conduct its business operations. 1 "Full-Time Employee" means a person who actually performs work at the Facility for not less than thirty-five (35) hours per week at an average annual salary of not less than $38,248 per year not including benefits, "Operations Date" means the date when the Company begins the manufacture of new low-cost homes at the Facility. "Quarter" means three consecutive calendar months commencing January 1,April 1, July 1 and October 1 of each calendar year. "Quarterly Employees" means the sum of the aggregate number of Full -Time Employees on each business day of a Quarter, divided by the number of business days in such Quarter. "Quarterly Payment Per Employee" means $1,636,800 (the Total Funds Advanced) divided by 28 (the number of quarters in the Repayment Period) divided by 171 (Employment Commitment): $1,636,800- 28 = $58,457.14_ 171 = $341.85. "Quarterly Rent Reimbursement Per Employee" means $1,189,108 (the rent reimbursement subsidy) divided by 28 (the number of quarters in the Repayment Period) divided by 171 (Employment Commitment): $1,189,108 ± 28 = $42,468.14 ± 171 = $248.35. "Repayment Reduction" means for each Quarter an amount equal to $1,636,800 (the Total Funds Advanced) divided by 28 (i.e. the number of Quarters in the Repayment Period): $1,636,800± 28 = $58,457.14. "Security Agreement" has the meaning set forth in Section 5 of this Agreement. 2. If the Company is not in default under this Agreement, City will advance to or for the benefit of Company funds in the amount of One Million Six Hundred Thirty-Six Thousand Eight Hundred Dollars ($1,636,800) (the "City Funds"), subject to and contingent upon the following conditions and covenants which Company agrees to perform and comply with: (a) City Funds will be advanced by City to Company for the following purposes: (i) Three Hundred Ten Thousand Eight Hundred Ninety-Two Dollars ($310,892) for the purchase of Equipment to be used and installed at the Facility or for construction costs for improvements to the Facility; and (ii) A rent reimbursement subsidy in the amount of One Million One Hundred Eighty-Nine Thousand One Hundred Eight Dollars ($1,189,108); and (iii) One Hundred Thirty-Six Thousand Eight Hundred Dollars ($136,800) for the purpose of providing pre-employment training of Company's prospective employees at Pueblo Community College, Pueblo, CO ("PCC"). Company agrees to give persons successfully completing the training program at PCC priority for hiring. The maximum amount for training 2 for each employee shall not exceed $800.00. (b) Company shall file in the office of the City Clerk copies of the following: (i)Company's certificate or other evidence of authority to transact business in the State of Colorado issued by the Colorado Secretary of State, (ii) certified copy of the resolution of the governing board of Company approving this Agreement and authorizing its officers to execute and deliver this Agreement and related documents in the name of Company, (iii) evidence reasonably satisfactory to City that Company will establish business Operations at the Facility. The date of the last to occur of the filings required under(i), (ii)and(iii) of this paragraph 2(b) shall be referred to herein as "Closing." If Closing does not occur on or before March 31, 2020, or such later date as the Parties shall mutually agree, City, at its sole option, may terminate this Agreement and the Parties shall thereafter be released and discharged from all obligations hereunder. (c) As a condition precedent to the disbursement of City Funds for the purchase of manufacturing equipment or payment of construction costs, Company shall file (i)with the City Clerk the documents described in Paragraph (b) above, and (ii) and shall file with the City's Director of Finance written requests for payment certified to be true and correct by an officer of Company that the amounts included in the request for payment have not been included in any prior request for payment and are for the actual cost of manufacturing equipment or construction costs, identifying the specific equipment for which payment is sought or construction costs for which payment is requested, including contracts for the purchase thereof and certificates of delivery and installation at the Facility, to the extent applicable. Company shall not submit requests for payment which exceed, in the aggregate, Three Hundred Ten Thousand Eight Hundred Ninety- Two Dollars ($310,892). The City agrees to disburse funds within thirty (30) days of submission of the Company's written request for payment, if such request is accompanied by supporting documentation as set forth herein. Following disbursement of the City funds, the Company shall acquire and install the Equipment and shall provide a report to the City within ninety (90) days thereafter documenting the purchase and the amounts paid therefor. (d) As an additional condition precedent to the disbursement of City Funds for the purchase of manufacturing equipment or payment of construction costs, Company shall execute a Lease Agreement for the Facility with the Facility's owner ("Owner"). Said Lease Agreement shall be approved in advance by the City, but such approval shall not be unreasonably conditioned, delayed, or withheld. (e) The City agrees to disburse funds for the rent subsidy within thirty (30)days of submission of the Company's written request for payment. Requests for payment shall be submitted by the Company in arrears, on a quarterly basis, for reimbursement of rent paid by the Company to the Owner of the Facility under the Lease in the prior quarter. With any request for reimbursement, the Company shall include a statement that, to the best of its knowledge, it is not in default of the Lease beyond any applicable notice and cure period, and that all rent for the prior quarter owed by the Company under the Lease has been paid in full to the Owner of the Facility. Company shall not submit requests for rent reimbursement which exceed, in the aggregate, the amount of One Million One Hundred Eighty-Nine Thousand One Hundred Eight Dollars ($1,189,108). From the Operations Date until the rent subsidy of$1.189,108 is paid in full, City shall make rent reimbursement payments to Company, on a quarterly basis, in an amount equal to the number of Quarterly Employees in the prior quarter times the Quarterly Rent 3 Reimbursement Per Employee. For example, if for the second Quarter of 2021, the number of Quarterly Employees is 110, the amount of rent reimbursement payable by the City to Company would be $27,318.50 (110 x $248.35). 3. Company acknowledges and agrees that the primary purpose of City in entering into this Agreement and the sole benefit to the City for making City Funds available to Company hereunder is the creation of jobs. Therefore, Company represents, covenants, and agrees that it will after the Effective Date of this Agreement continuously conduct its business Operations and employ Full-Time Employees at the Facility as follows: (i)during the Period from the Effective Date of this Agreement to the Employment Commitment Date,Company shall use commercially reasonable efforts in good faith to employ as many Full-Time Employees as reasonably justified by its business Operations; (ii) on and after the Employment Commitment Date continuously conduct its business Operations at the Facility and employ not less than One Hundred Seventy- One(171)Full-Time Employees at the Facility whose annual compensation shall average at least Thirty-Eight Thousand Two Hundred Forty-Eight Dollars ($38,248), not including benefits, for a period of seven(7)years following the Employment Commitment Date. Company will use good faith efforts, in accordance with its sound business practices,to employ residents of the County of Pueblo as Full-Time Employees including, without limitation, engaging in reasonable programs and posting of employment openings in the County of Pueblo (collectively the "Employment Commitment"). So long as Company does not default in its Employment Commitment set forth in Section 3, Company shall be under no obligation to repay the City Funds at any time. 4. Notwithstanding anything contained in this Agreement to the contrary, if Company shall for any reason default in its Employment Commitment set forth in Section 3, Company shall repay to City a pro-rata share of the City Funds advanced by City under Section 2 hereof based upon the number of Full-Time Employees employed by Company at the Facility(the"Repayment Obligation"), as follows: (a) During the seven (7) year Period starting on the Employment Commitment Date and ending eighty-four (84) months thereafter (the "Repayment Period"), Company shall pay to City an amount each Quarter equal to the Quarterly Employees less than One Hundred Seventy-One (171) Full-Time Employees employed at the Facility by Company multiplied by the Quarterly Payment Per Employee(the"Company's Quarterly Payments"). For example, if for the second Quarter of the third year after the Employment Commitment Date the number of Quarterly Employees is 149, the amount payable by Company to City on or before the fifteenth (15th) day of the next calendar month would be (171-149) x $341.85 = $7,520.70. (b) Company's Quarterly Payments, if any, shall be paid to the City without notice, demand, deduction or setoff on or before the fifteenth(15th) day of the month after the end of each quarter during the Repayment Period at the office of the Director of Finance of City, 1 City Hall Place, Pueblo, Colorado, 81003, or such other person or location as the City may designate. All past due Company's Quarterly Payments shall bear interest at the rate of eight Percent (8%) per annum ("Default Interest") until paid. (c) Within thirty (30) days after the end of each quarter after the Employment Commitment Date and for one calendar month after the expiration of the Repayment Period, Company will submit to City's Director of Finance Company's statements showing the Quarterly 4 Employees for the preceding quarter and their quarterly salaries (together with the basis upon which Quarterly Employees were computed) certified by an officer of the Company to be true and correct. For purposes of verifying Company's employment and salaries,City shall have access to Company's records relating to Company's employees employed at the Facility. (d) Notwithstanding anything contained in this Paragraph 4 to the contrary, if Company defaults in its Employment Commitment and Company's Repayment Obligation, and such default is not cured within sixty (60) days after written notice specifying the default is given by City to Company, then in such event, the entire balance of Company's Repayment Obligation shall become due and payable,without notice,notice being hereby expressly waived,together with Default Interest from the date of default, but in no event more than the amount of City Funds advanced by City under Section 2 hereof plus Default Interest as herein provided. Company's Repayment Obligation is absolute and unconditional and shall not be abated,reduced, diminished, modified, withheld or otherwise offset for any cause or reason whatsoever 5. Company's Repayment Obligation under this Agreement shall be deemed to be a debt of Company payable to City until Company performs and discharges its obligations hereunder including, without limitation, its Repayment Obligation. Company's obligations under this Agreement including its Repayment Obligation shall be secured by a perfected first security interest in the Equipment purchased with City funds. Prior to any disbursement of funds by City for Equipment, Company shall execute and deliver to City, Company's Security Agreement, Financing Statement, and such other documents as may be reasonably required to perfect a first security interest in the Equipment all in form and content approved by City's Attorney (the "Security Agreement"), such approval not to be unreasonably conditioned, delayed, or withheld. Company may be permitted from time to time to substitute items of replacement equipment for items of Equipment removed from the Facility, provided that an amended Security Agreement meeting the requirements of this section is executed and delivered identifying the substitute items of equipment and deleting the item of Equipment being replaced. Notwithstanding the foregoing, however,the City agrees that it shall not be permitted to enforce the Security Agreement(or take possession of the Equipment provided as collateral pursuant thereto) unless (and to the extent that) the Company is in default under this Agreement beyond all applicable periods for cure. 6. (a) Prior to instituting any proceeding to enforce Company's Repayment Obligation under Section 4, City shall notify Company in writing of its intention to institute such proceedings. Company may request relief from its Repayment Obligation by delivering to City within twenty(20)days after date of City's notice, Company's written request for relief specifying the grounds upon which such relief is sought together with documents supporting said grounds. Within ninety (90)days after receipt of Company's request, City will schedule a meeting with the Mayor and City Council at which Company may appear. City will notify Company of the time and place of the meeting. Failure of Company to timely deliver its complete written request for relief or to appear at the scheduled meeting with the Mayor and City Council shall entitle City to immediately institute proceedings to enforce Company's Repayment Obligation. (b) City Council may or may not, in its sole and absolute discretion, relieve Company, in whole or in part, from Company's Repayment Obligation. Any action taken by the City Council relating to a request for relief shall be final and binding on Company, and not subject to judicial review. Any such action by City Council is, and shall constitute, a legislative measure. 5 Nothing contained in this Section 6 shall grant or be construed to grant to Company any right or claim to relief from its Repayment Obligation or a hearing with respect thereto. (c) No delay by the City in scheduling a meeting, or failure by City to exercise its right to enforce this Agreement, including Company's Repayment Obligation, and no partial exercise of that right, shall constitute a waiver of that right. 7. In the event of any litigation arising under this Agreement, the court shall award to the prevailing Party its costs and reasonable attorney fees. Exclusive venue for any such litigation shall be Pueblo County, Colorado. All such litigation shall be filed in the District Court, County of Pueblo, State of Colorado and each Party submits to the personal and subject jurisdiction of such District Court. To the extent allowed by law, each Party waives its right to a jury trial. 8. This Agreement expresses the entire understanding of the Parties and supersedes and abrogates any and all prior dealings and commitments, whether oral or written, with respect to the subject matter of this Agreement and this Agreement may not be amended or modified except in writing signed by both Parties. Any waiver of any provision of this Agreement must be in writing and signed by the Party whose rights are being waived. No waiver of any breach of any provision hereof shall be or be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision of this Agreement. The failure of either Party to enforce or seek enforcement of the terms of this Agreement following any breach shall not be construed as a waiver of such breach. 9. This Agreement shall be construed in accordance with and be governed by the laws of the State of Colorado without regard to conflict of law principles. 10. Any notices hereunder shall be sufficiently given if given in writing personally or mailed by first class, registered, or certified mail, postage prepaid, addressed: (a) if to City, Mayor, City of Pueblo, 1 City Hall Place, Second Floor, Pueblo, CO 81003 with a copy to City Attorney, 1 City Hall Place, Third Floor, Pueblo, Colorado 81003, or (b) if to the Company, indieDwell Colorado, Attn: President/CEO, 1780 Pennsylvania Street, Denver, CO 80203 or to such other person or address as either Party shall specify in written notice given to the other Party pursuant to the provisions of this Section 10. 11. Time is of the essence hereof. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns, provided Company may not, except as provided below, assign this Agreement or any interest herein without the express written consent of the City, which consent may be arbitrarily withheld, conditioned or delayed. Any assignment or attempted assignment of this Agreement by Company without such consent shall be null and void. However, if Company proposes to assign this Agreement to a purchaser of its business, the transaction is an arms-length transaction, the purchaser assumes and agrees to perform Company's obligations under this Agreement,then, in such event,the assignment may be 6 made with the express written consent of the City, which consent may not be unreasonably conditioned, delayed, or withheld. The City shall have the right to determine that said proposed purchaser is credit worthy, has sufficient business experience in the manufacturing sector, and is capable of performing Company's obligations under this Agreement. 12. The persons signing this Agreement in the name of and on behalf of Company represent and warrant that they and Company have the requisite power and authority to enter into, execute, and deliver this Agreement, and that this Agreement is a valid legally binding obligation of Company enforceable against Company in accordance with its terms. 13. Company represents and warrants that no person, entity, or organization has been employed or retained or will receive or be paid,directly or indirectly,any commission,percentage, contingent fee or any other remuneration,payment or receipt of which is contingent upon approval of this Agreement or City's advancement of City Funds to Company hereunder. For breach or violation of this warranty, City shall have the right to terminate this Agreement, or recover the full amount of such commission,percentage,contingent fee or other remuneration, and/or to seek such other remedies legally available to City, which remedies shall be cumulative. 14. In no event shall City, its officers, agents or employees be liable to Company for damages, including without limitation, compensatory, punitive, indirect, special or consequential damages,resulting from or arising out of or related to this Agreement or the performance or breach thereof by City or the failure or delay of City in the performance of any covenant or provision under this Agreement on its part to be performed. In consideration of City entering into this Agreement, Company hereby waives and discharges City, its officers, agents and employees from all claims for any and all such damages. No breach, default, delay or failure of City under this Agreement shall be or be construed to be a waiver, discharge or release of Company's Repayment Obligation under Section 4 hereof with respect to the amount of City Funds actually advanced or paid by City to or for the benefit of Company pursuant to Section 2 hereof 15. If any provision of this Agreement is declared by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the other provisions of this Agreement which shall remain in full force and effect. 16. Neither Party shall be, or hold itself out as, agent of the other or as joint venturers or partners under this Agreement. 17. Each Party acknowledges that this Agreement was fully negotiated by the Parties and, therefore, no provision of this Agreement shall be interpreted against any Party because such Party or its legal representative drafted such provision. 18. The provisions of this Agreement are for the exclusive benefit of the Parties hereto and their successors and Permitted assigns, and no third party shall be a beneficiary, or have any rights by virtue of this Agreement. 19. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed for all purposes to be an original, and all such counterparts shall together constitute but one and the same original. 7 8 Executed effective the day and year first above written. [ SEAL ] CITY OF PUEBLO, a Colorado municipal corporation �da OAA/vvut—OLkA"vtL) y 7 / 4 Attes B City Clerk Mayor [ SEAL ] indieDwell Colorado a Colorado nonprofit corporation By Name: '–"a +f3LC . ,4�p.7; Title: Idaho STATE OFC ) ) ss. COUNTY OF d.0. ) The foregoing instrument was acknowledged before me this /7 day of Iv otekte-''- , 2019 by M-t'• m X907-1- as bjc ec Ckat►rV-t o,v1 of indieDwell Colorado, a Colorado nonprofit corporation. Witness my hand and official seal. My commission expires: hr I I , ?AZS. [ SEAL ] Notary 'ubhc KARI ANDERSON COOK Notary Public-State of Idaho Commission Number 20190643 My Commission Expires Apr 1, 2025 9