Agenda - Public Works Committee - 09/15/2020

Home

Public Works Committee Meeting Date: 09/15/2020 By: Tim Gladhill, Community Development 5. 1. Title: Consider Settlement Offer for Water and Sewer Cost Contribution and Reimbursement Agreement; Case of 21 st Century Bank Purpose/Background: The purpose of this case is to consider a Settlement Offer from 21 st Century Bank to settle the remaining Watermain and Sanitary Sewer Cost Contribution/Reimbursement Agreement in the amount of $50,000, which is set to expire in 2026. The original offer from 21 st Century Bank was for $95,000 and Staff has negotiated that offer to $50,000. The realistic potential liability to the City ranges from $100,000 to $200,000 when factoring in growth forecasts in the Reimbursement Area. In summary, Staff believes that this will likely result in a long-term cost savings to the City. It is repeated that the original Developer financed an otherwise City obligation (future development expense reimbursed through Trunk Fees) and was therefore entitled to reimbursements of Trunk Fees for other areas that benefited from the extension of these trunk lines. In the early 2000s, the City entered into a Reimbursement Agreement with Oakwood Land Development for a $6 Million Waterrnain and Sanitary Sewer Extension that served both the Brookfield and Sweetbay Ridge/Woodlands Neighborhoods. At that time, the Developer (Oakwood Land Development) agreed to construct a major extension of the City's Water and Sanitary Sewer Trunk Lines to service these areas. These improvements are typically paid for by Developers through standard Trunk Fees. In this case, the trunk lines 'leapfrogged' several undeveloped areas. In this case, the City did not want to take on the risk of areas outside of these two neighborhoods not developing and not recouping these costs through Trunk Fees from other developments. In this case, Oakwood Land Development agreed to take on obligations outside of their project and in exchange would be reimbursed through future trunk fee collections. Unfortunately, reimbursements slowed signficantly during the 2008 Recession. In 2009, Oakwood Land Development defaulted on loans on the project and 21st Century Bank foreclosed on land assets and assumed the Reimbursement Agreement. The City has amended the Reimbursement Agreement once to extend the sunset date to 2026. Copies of the original and amended agreement are attached. Of the $6 Million Reimbursement Amount, the City has only reimbursed through transfer of Trunk Fees or credits to Trunk Fees in Brookfield in the amount of approximately $1M. While there is still a significant liability on the books in terms of total reimbursement amount, the Agreement will expire in 2026. 21 st Century Bank will in no way achieve the full Reimbursement Amount due to lack of development within the Reimbursement Area. Staff acknowledges that this is a complex issue and members are encouraged to ask questions. As stated above, the likely outcome of this settlement is an actual cost -savings to the City. The City will likely be obligated to reimburse certain trunk fees as it has been doing since 2006 if we don't accept this offer. The long-term cost to settle now as opposed to 2026 is forecasted to demonstrate a cost -savings. Timeframe: 30 minutes Observations/Alternatives: