Agenda - Council Work Session - 09/29/2009

Home

paragraph 1 of the Development Agreement which provides that the City approves the plat conditioned on the Developer developing the Plat in accordance with City Code Section 9.50. City Code Section 9.50 Subd. 5d. provides that the Development Agreements shall provide that in the event the required improvements are not timely completed, ". . . all amounts held in the Development Agreement may be drawn upon by the City. . .". It bears reminding that the lot grading and erosion control, which represents the $26,000 expenditure, is a Stage I required improvement. Therefore, the City takes the position that it has the legal right to pay the $26,000.00 bill from the inspection fees escrow ~ E. The S & W Agreement At the time that the S & W Agreement was under negotiation, the Bank indicated that it would provide the funds to Oakwood to guarantee payment of the $6.0 million "loan" to the City on condition that the Bank received a security interest in the form of the right to receive the future payments. The City therefore included a clause in the S & W Agreement (Paragraph 3.06) that specifically states that if a lending institution required such assignment, that the City consented to the assignment. It provides further that on notice to the City from Oakwood and the lender, that future payments would go to the lender. Such written Notice was in fact given to the City in the spring of 2006 in the form of a letter to then-administrator Norman. Oakwood was given credit for $223,562.00 in the Development Agreement for Oakwood I; $143,914.00 in Oakwood II; and $134,728.00 in Oakwood III, for a total credit against the $6.0 million of $ 502,205.00. There should therefore be about $5.5 million left in reimbursement money from future hookups. However, another $208,216.00 in credits was given by the City to Sweetbay Land Company in the development of Sweetbay Ridge. While the two principals of Oakwood are also investors in Sweetbay Land Company, there are others as well, and a different lender provided the funds to develop Sweetbay Ridge. Oakwood was not the developer and the Bank should have received this $208,216.00 rather than to have it credited to a different developer. In discussions with City staff, no explanation has been forthcoming as to why Sweetbay was given this credit. Staff has indicated that it believes that another clause (3.05) of the S & W Agreement entitles it to give such credits to other developers, but it does not appear to read that way; it merely permits the City to make other deals. It does not absolve the City of the duty to collect and pay over to the Bank the future hookup charges. The S & W agreement also provides that if Oakwood did not complete all of the development in three identified projects, that the "credits" from those projects would transfer to the right to receive payment from fees on unrelated hookups. Staff has also indicated that it believes that the S & W Agreement entitles the City to deduct other project costs prior to paying reimbursement. I find nothing in the S & W Agreement to that effect. Absent an agreement, there is an issue as to whether or not $208,216.00 was improperly credited to another entity. Other aspects of the S & W Agreement will remain unclarified. CITY RESPONSE: 5