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<br />the default of the developer is regrettable, the Bank acts as surety only for amount it agreed to. <br />The Bank will perform its legal obligations to the City and the developer. <br /> <br />However, the Bank is willing to resolve a number of otherwise difficult issues, and to forego the <br />attempt to exercise other legal rights. It is the Bank's position that in 20-20 hindsight, the City <br />would likely have not allowed a number of things in Brookfield, and would have not overlooked <br />a number of other things. Had the housing market stayed strong, the Brookfield projects would <br />have been completed and all parties would be whole. That is not the reality, however. The <br />following is proposed as a compromise that benefits the City far more than the alternative of <br />doing nothing. <br /> <br />A. Unpaid Contractor <br /> <br />The Bank has negotiated a potential settlement with Knife River for $135,000.00. This sum can <br />be paid now and both the Bank and the City will be released from any further liability to Knife <br />River. This amount would be deducted dollar-for-dollar from the $261,384.00 Letter of Credit, <br />leaving the Letter of Credit exposure at $126,384.00. <br /> <br />B. Unfinished Work <br /> <br />The Bank will pay over the remaining Letter of Credit balance of $126,384.00 to the City. The <br />City will use this money to complete whatever needs to be done (punch list, density transition <br />landscaping, etc.). The Bank will not take on any further obligations in the development, <br />including maintenance of improvements. <br /> <br />C. Homeowner's Association and Pond Maintenance <br /> <br />Oakwood appears to have the legal ability to modify the Declarations that created the <br />Homeowners' association, to provide for the proper assessment of dues. It is believed that such <br />modifications could also include certain ongoing pond maintenance as an ongoing association <br />cost, as all lot owners are supposed to be entitled to pond access. Oakwood is willing to make <br />these modifications in exchange for certain concessions from the Bank, and the Bank is willing <br />to accept the modifications so that the mortgage foreclosure does not invalidate the Declarations, <br />and so that the 80 existing platted bilt unsold lots and the future undeveloped lots are covered as <br />well. However, we cannot guarantee that modified Declarations would be effective or that the <br />ultimate association would do a good job in administering things. That is a risk that was taken <br />by all when the concept was accepted. <br /> <br />D. Cash Escrow <br /> <br />The Bank is willing to surrender any claim to the Cash Escrow to the City, for use as the City <br />sees fit in connection with Brookfield issues. That would cover the $26,000 in present erosion <br />control expense, and leave $64,000 to deal with other future issues. Staff has discussed using <br />these funds to deal with pond and Homeowners Association matters, but that would be <br />discretionary with the City. <br /> <br />7 <br />