Agenda - Council Work Session - 09/29/2009

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Randall and, Goodrich, RL. C Memo To: Ramsey City Staff From: William K. Goodrich, City Attorney Tim Himmer, City Engineer Brian Olson, Principal City Engineer Re: Brookfield 1 S\ 2nd and 3rd Additions Date: September 24, 2009 Attorney Bill Dorn, on behalf of 21 st Century Bank, has written a letter outlining the issues as he sees them and proposed resolutions of the issues regarding the three Brookfield Additions (the Developments". This memorandum is intended to respond to those issues following the format of Mr. Dorn's letter. A. Unpaid Contractor In June of 2008 substantial work needed to be done to complete the paving of the roads in Brookfield II and III. A meeting was held, and in attendance were representatives of the City engineer, a contractor (Knife River Construction), the Bank and Oakwood. While recollections of what happened in this meeting vary, the bottom line is that any "agreements" reached in the meeting should have been made in written form. City staff made a commitment to Knife River that they would be paid if they completed their work, under an erroneous assumption that the Bank's letter of credit could be tapped for that purpose if Oakwood failed to pay the contractor. The Bank had no role at this point, as the construction agreement was between Oakwood and Knife River. Knife River did the work, was not paid by Oakwood, and has still not been paid. The Knife River claim is for approximately $212,000.00 and their lien rights have expired. Knife River has agreed to accept $135,000.00 in full payment at this point. However, Oakwood has no funds with which to pay, and the Bank is not willing to fund payment without a settlement of all the issues. Absent a settlement, Knife River will remain unpaid and be left to attempt to recover its losses through a civil lawsuit, likely against both the City and the Bank. Oakwood has no resources from which to recover. The Bank maintains that it made no representation to any party, has no contractual obligation to any party, and that the Development Agreements do not obligate Oakwood to pay its subcontractors, meaning that the Letter of Credit does not guarantee such payment.