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HomeMy WebLinkAbout09.28.09 Special Council Minutes COUNCIL MINUTES SPECIAL September 28, 2009 1. CALL TO ORDER The meeting was called to order by Mayor Larson at 7:00 p.m. 2. PLEDGE OF ALLEGIANCE Mayor Larson led the audience and Council in the Pledge of Allegiance. 3. ROLL CALL Members Present: Members Absent: Also Present: Larson, Donnelly, Fogarty, May, Wilson None Peter Herlofsky, City Administrator; Kevin Schorzman, City Engineer; Tina Hansmeier, Economic Development Specialist Audience: 4. PETITIONS, REQUESTS AND COMMUNICATIONS a) Authorize Mystic Meadows 1st Addition Infrastructure Completion - Engineering City Engineer Schorzman requested the Council declare Mystic Meadows in default and authorize staff to collect on the letter of credit. Councilmember Fogarty asked ifthe developer was aware of the City's request. Staff explained they are not aware of this meeting, but they are aware the intent is to draw on the letter of credit if work is not started by September 29, 2009. Councilmember Fogarty asked if the developer has ever asked for an extension. City Engineer Schorzman explained this is a process that staff wanted to start last year, but because of the foreclosure process and the redemption period, there is a certain period of time where no one can do anything. That process took up the 2008 construction season. City Engineer Schorzman reviewed the questions from Councilmember May. The amount of$596,593 is 10% of the original security. The reason for being under secured is because the City does not have any of the outlots or the easement for the trunk sanitary sewer line that crosses private property deeded to the City. If the City has to purchase this land, there mayor may not be enough money to do that. The outlots still belong to Mr. Tim Giles, the developer, so if it goes through tax forfeiture and the City needs to purchase the parcels, staff feels it would be appropriate to use the letter of credit to do that rather than taxpayer money. Councilmember May clarified that the money would be used to pay the taxes and the City would take ownership. The City would not actually pay Mr. Giles for the parcels. Staff replied it depends on how cooperative he is. The county sends a list a month before the foreclosure process and the City then has to determine what to do. The City would pay the fair market value for the property. Currently Council Minutes (Special) September 28, 2009 Page 2 the outlots are valued at $98,000. Any funds left over from the letter of credit go back to the finance company. The City would not be liable for any unfunded obligations against the development. If funds are short, the infrastructure takes priority, then the outlots and easements, engineering bills are paid, and then any outstanding bills not pertaining to the City are paid. A title search to determine if there are any liens on the property is not done. If anyone makes a claim to the City, then staff holds the money until it has been resolved between the parties. The City has a contract with Mr. Giles only; not the subcontractors. The development contracts are set up to provide leverage so the developer does not get any money back until bills are finalized. The City is not responsible for liens placed on the property by others. Declaring a development in default means the developer, Giles Properties, has not completed their obligations under the development contract. Builders Development & Finance, Inc. (BD&F) issued the letter of credit. The City does not have a contract with them. BD&F is trying to minimize their risk. If the developer begins working on the project tomorrow, the letter of credit can be reduced by almost $200,000, which reduces their liability if Mr. Giles will give the City the outlots. If work is not started tomorrow, the City will have McNamara finish the work as they have done the previous work and they can complete the work this season. Currently the letter of credit is for $828,000. To complete the required public improvements, the estimated cost with engineering time is $604,000. The completion of the as-built is $3,510. Acquiring the outlots based on the county's value plus the back taxes and staff time is $123,700. The easement from the east side of the development to the MCES sewer line would cost $116,000. This totals $847,300. This does not include the $170,000 claim from Olsson Associates. This is why there is the potential to be under secured on this project. Councilmember Wilson asked how the letter of credit was reduced so that there is the potential the City becomes liable. City Engineer Schorzman stated it goes back to when development was moving fast, these issues did not come up, and the reduction of the letter of credit was based only on the remaining work not the other obligations in the development contract. The most recent reduction was on April 23, 2007, for completion of work on the infrastructure. The letter of credit started at $5,900,000. Councilmember Donnelly asked about the urgency to get the work done. Staff explained another layer of asphalt has to be put down to protect the curbing, manholes, and the snow flow equipment. Councilmember Donnelly asked if Giles participated in 195t Street and if the letter of credit also has to cover those improvements. Staff replied no, there was $450,000 collected for the completion of the 195th Street project through assessments. At the time the 195th Street project was let, the City had collected $330,000. The balance is collected as the lots are developed. Councilmember Fogarty clarified there is curb to be replaced and a second lift to be installed throughout the entire development. Staff stated the majority ofthe work is related to the curb and gutter replacement and placing the second lift. There are some small clean up items. The total on the clean up items is $18,000. MOTION by Fogarty, second by May to declare the Mystic Meadows 1st Addition development in default, and authorize staff to draw Council Minutes (Special) September 28, 2009 Page 3 down BD&F Letter of Credit No. 23717 in its entirety. APIF, MOTION CARRIED. 5. ADJOURN MOTION by Fogarty, second by Wilson to adjourn at 7:42 p.m. APIF, MOTION CARRIED. Respectfully submitted, (~;<-~~ h,'?c<-.~~~ Cy~thia Muller Executive Assistant