Agenda - Public Works Committee - 09/15/2020

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By way of reinforcing the overall obligations and benefit to the City: 1. In 2006, Oakwood Land Development agreed to take on additional obligations to extend Trunk Water and Sanitary Sewer that would have normally been the obligation of the City and/or other Projects/Developers. In exchange, the City agreed to forward future Trunk Fees collected from projects that benefited from this Trunk Line Extension for a period of time. 2. In 2009, Oakwood defaulted on a loan with 21st Century Bank. 21st Century Bank foreclosed on certain assets of Oakwood Land Development and assumed the Reimbursement Agreement above. 1. Prior to the foreclosure, Oakwood Land Development was reimbursed $492,308. 2. 21st Century Bank acquired the remaining undeveloped area in Brookfield as of 2009 through foreclosure. Rather than a payment from 21 st Century Bank reimbursement back to 21 st Century Bank, the City simply credited these amount in Brookfield 4th through 8th Additions ($315,386). 3. Woodlands (undeveloped phase of Sweetbay Ridge) was subject to the reimbursement and Trunk Fees from this Development were reimbursed to 21st Century Bank ($221,575). 4. Total Reimbursement To Date = $1,029,269. 3. While the total reimbursement amount is far higher, the realistic potential liability to the City ranges from $100,000 to $200,000 due to the expiration date of the Reimbursement Agreement, less than the current offer of $50,000. 4. The liability on the books impacts our long-range water and sewer planning. By agreeing to the Settlement Agreement amount today, we will be able to re-evaluate our Trunk Fee Charges moving forward. While the area north of Trott Brook ('Additional Reimbursement Area' in Reimbursement Area) is included in the Reimbursement Area, it will require the extension of new Trunk Water and Sanitary Sewer. The costs of these extensions are not reimbursable to 21 st Century Bank and 21 st Century Bank is not likely to see any reimbursement from this area prior to 2026. The area just south of the new Brookside Elementary School ('Harmony Farms' in the Reimbursement Agreement) has a high degree of potential to develop prior to the sunset clause of 2026. If that were to occur, the cost of reimbursement to 21st Century Bank would exceed the current settlement offer. There is no guarantee that this area will develop prior to 2026, but it is possible. Funding Source: The settlement would be paid for through the City's Water and Sanitary Sewer Accounts. This would not be a General Fund Expenses. The settlement would reduce our liability on our financial records. Recommendation: Staff acknowledges that there is some risk in accepting this offer. It is possible that there are no fees to reimburse 21 st Century Bank due to lack of development between now and 2026, although that is unlikely. Staff believes the risk tolerance is low of having a higher reimbursement amount by waiting to see if the Harmony Farms area develops after 2026. It is more likely that the level of development that will occur will result in a reimbursement amount higher than the current settlement amount. Additionally, the settlement amount itself appears to be fairly low. While there is some risk involved, Staff believes this to be a fair offer and takes a potentially significant liability off the books. Action: Motion to recommend that the City Council accept the Settlement Offer from 21 st Century Bank related to the Waterrnain and Sanitary Sewer Cost Contribution/Reimbursement Agreement. Attachments Reimbursement Area Original Reimbursement Agreement [Current Agreement] Amended and Restated Reimbursement Agreement