HomeMy WebLinkAbout5D - Development Contract for Maple Glen 2nd Addition
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
DECEMBER 1, 2008
5D
STEVE ALBRECHT, DIRECTOR OF PUBLIC WORKS
CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING AMENDMENT
NO.1 TO THE DEVELOPMENT CONTRACT FOR MAPLE GLEN 2ND
ADDITION
Introduction
The purpose of this agenda item is for the City Council to consider
Amendment No. 1 to the Maple Glen 2nd Addition Development Contract.
Historv
On October 3, 2005, the City Council approved the Development Contact for
Maple Glen 2nd Addition. Construction of Maple Glen 2nd Addition with the
exception of final paving (wear course) and individual lot landscaping was
completed in the fall of 2006. On October 16,2007 the City notified Tollefson
Development Inc. (Developer) that streets in certain areas of the plat had
settled and needed to be repaired, but due to poor soil conditions the City
would prefer the Developer wait to complete the final paving when weather
conditions permitted in 2008.
Current Circumstances
On September 19, 2008 the City notified Tollefson Development Inc. that it
was in default of the Development Contract due to failure to complete the final
paving. The Developer responded to the City stating that they could not
complete the paving this year and asked the City to allow them to complete
the work in 2009. The City had already delayed the paving for 2 winters to
allow for settling. Further delay could also result in additional damage to the
concrete curb. As part of a project close out initiative this fall all other
developments in town with the exception Northwood Meadows due to street
settlements have been required to complete final paving.
On October 3rd the City of Prior Lake attempted to draw on the Letter of Credit
(LOC) for Maple Glen 2nd to complete the paving and was notified that the LOC
had expired without the required notice. It was discovered that additional
language had been added by the Developer's Bank to the LOC that voided the
City's specific terms requiring 45 days notice prior to expiration of the LOC.
When City Staff determined that the LOC was no longer valid a freeze was
placed on the issuance of building permits on any of the remaining 23 lots
owned by the Developer at Maple Glen 2nd. By taking this action the City will
not process building permits for these lots until the Developer and the City
resolved the Development Contract issues. On October 13th the City met with
the Developer to discuss enforcement of the Development Contract and
completion of the required improvements.
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Phone 952.447.9800 / Fax 952.447.4245
City Staff and the Developer outlined amendments to the Development
Contract that include the following:
1) Allow the Developer until December 1, 2008 to submit a new LOC to
the City.
2) Method through which the City initiates completion of the
improvements and assesses the remaining lots owned by the
Developer 100% of all costs.
3) Petition of improvements and waiver of appeal to be included in the
agreement.
4) Mechanism by which remaining lots could sold if 1/23rd of the required
assessment is pre-paid to the City prior to building permit.
The City Attorney has prepared an amendment to the Development Contract
which includes provisions to deal with the four items listed above. The
amendment has been signed by the Developer and is ready for City Council
approval.
ISSUES:
The amendment process and use of assessments is not the City's desired
process for enforcement of development contracts. The use of LOC's is
preferred as it is straight forward and does not require the assessment
process.
City Staff missed the additional language during a review of the LOC. The
language included in the LOC was part of the original Maple Glen Addition
which was approved in January of 2005 under the City's old Development
Contract format. No issues were encountered with completion of the Maple
Glen Addition. The LOC for Maple Glen 2nd was identical to the LOC for the
Maple Glen Addition which included this language and was not permitted
under the City's Development Contract format which was updated in June of
2005. The City's review process did not include a sign-off or method of
verifying and ensuring that qualified individuals were reviewing the LOC's.
This is a critical part of the Development Contract process and because the
LOC's were accepted in 2005 and Staff has no record of which staff member
approved the LOC. For these reasons the City has implemented immediately
staff guidelines that require a minimum of two individuals limited to the City
Engineer, Assistant City Engineer, Director of CDNR or City Attorney to review
all submitted LOC's and sign off on them.
Staff also has reviewed all projects LOC's for the language included in the
Maple Glen 2nd Development and has not found any similar issues.
FINANCIAL
IMPACT:
The assessment process will increase the amount of City Staff time required
to complete the project. The Developer has waived the right of appeal which
will allow the City to assess 100% of incurred costs back to the Developer.
The construction will add to the City's 2009 bonding however the City will
recapture 100% of the costs through assessments with no impact to the tax
payers.
The City still holds over $40,000 of the Developer's escrow for construction
services. This money can be held to guarantee reimbursement of any costs
incurred in preparation of the agreements.
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The proposed solution avoids the City pursuing enforcement of the
Development Contract in court which could be costly to the City.
ALTERNATIVES: The alternatives are as follows:
1. Approve Amendment No. 1 to the Development Contract for Maple Glen
2nd Addition
2. Accept petition for improvements by developer and order preparation of
the Feasibility Study.
3. Deny this item for a specific reason and provide Staff with direction.
4. Table this item until some date in the future.
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A RESOLUTION APPROVING AMENDMENT NO.1 TO THE MAPLE GLEN 2ND ADDITION
DEVELOPMENT CONTRACT
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
Motion By:
Second By:
On October 3, 2005, the Prior Lake City Council approved the Development Contract
for Maple Glen 2nd Addition; and
On September 19, 2008 the City of Prior Lake notified Tollefson Development that they
were in default of the Development Contract for Maple Glen 2nd Addition and their letter
of credit had expired; and
Tollefson Development has signed Amendment No. 1 to the Development Contract
Requesting the City Council accept their petition to have the City complete the
outstanding improvements covered by the development contract; and
Tollefson Development has requested that the City assess them for the improvements
and have waived their right to appeal that assessment.
The City Attorney has recommended that this is the best course of action available to
the City for completion of the improvements stipulated in the Development Contract.
NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA as follows:
1. The recitals set forth above are incorporated herein.
2. Amendment No.1 to the Maple Glen 2nd Addition Development Contract is hereby approved.
3. City Staff is authorized to complete the Feasibility Study for completion of Maple Glen 2nd and all
associated costs shall be assessed in accordance with the Development Contract Amendment.
PASSED AND ADOPTED THIS 1 st DAY OF DECEMBER 2008.
YES
NO
I Hausen
Erickson
Hedbers
leMair
Millar
Haugen
Erickson
Hedberg
leMair
Millar
Frank Boyles, City Manager
R:\Council\2008 Agenda Reports\12 01 081Maple Glen 2nd AmElndl'11l'nt.RElsQlution - x.doc
WWW.CltyorpnOrlal<e.com
Phone 952.447.9800 / Fax 952.447.4245
AMENDMENT No.1 TO DEVELOPMENT CONTRACT
MAPLE GLEN 2ND ADDITION
PROJECT #05-101
Amendment No. 1 to the Development Contract for Maple Glen 2nd
Addition is entered into this day of November, 2008, by and between the
CITY OF PRIOR LAKE, A Minnesota municipal corporation ("City") and
Tollefson Devekpment, Inc., a Minnesota corporation (the "Developer"). Based
on the mutual promises and covenants set forth herein, the sufficiency of which is
not disputed, and for other consideration, the City and Developer (collectively
"Parties") agree as follows: .
RECITALS
Whereas, On October 3, 2005 the City and Developer entered into a
Develvp.luent Contract, incorporated fully herein as if fully set forth as Attachment
1, for the plat known as Maple Glen 2d Addition; and
Whereas, The City Council of Prior Lake "approve [ d] the Plat on condition
that the Developer enter into this Develvp.l.l.lent Contract, furnish the Security
required by it, and record the Plat and Develvpluent COuL. act. . ."; and
Whereas, The Developer is in breach of the Develvpment Contract pursuant
to paragraph 39.A.(2) and (7) thereof; to wit, the Developer has failed to complete
Developer Installed Improvements and has failed to renew its Irrevocable Letter of
Credit at least forty-five (45) days prior to its expiration date; and
Whereas, The City has complied with the notice provisions set out in
paragraph 40 of the Development Contract; and
Whereas, City officials and representatives of the Developer met to discuss
the actions the Developer could take to cure the it's Defaults of the Development
Contract and the City's Remedies pursuant to paragraph 39.B; and .
Whereas, Developer's representatives indicated the down turn in residential
sales in the Greater Minneapolis Metropolitan Area and the economy have created
a credit issue for Developer with its Mortgagor, M&I Bank; and
Whereas, The Developer and M&I Bank are working on a solution, which
Developer believes will be in place by December 1,2008; and
Whereas, An vpGon available to Developer is to sell the development rights
to the Plat and remaining lots in Maple Glen 2nd Addition to a developer,
satisfactory to the City, who can complete the improvements and remedy the
defaults; and
Whereas, The Developer desires to complete the Plat and meet its
obligations, as set out in the Develvp111ent Contract and this Amendment No.1,
and therefore proposed that if Developer fails to replace the required Security, to
guarantee completion of the Developer Installed Improvements and other
obligations in the Development Contract, by December 1, 2008 that the City
complete the Developer Installed Improvements and specially assess the cost
against the twenty-three (23) remaining unsold lots in the Plat owned by the
Developer, which lots are legally described in Exhibit 1 of this Amendment,
attached hereto and incorporated herein as if fully set forth; and
Whereas, The City Council is aware of the challenges to developers and
builders caused by the decline in the housing market and that the severe economic
problems in the country is causing a reluctance on the part of banks and other
financial institutions to extend credit; and
Whereas, The Developer acknowledges that one of the reasons the City
requires a developer to provide Security as a condition of plat approval is to assure
the completion of the improvements associated with the Plat;
Whereas, The Developer further acknowledges the obligations of the City to
the owners of the undeveloped and developed lots in Maple Glen 2nd Addition
assure the Developer Installed Improvements are completed.
NOW THEREFORE, based on the mutual promises and covenants set forth.
herein, the sufficiency of which is not disputed, the City and Developer
(collectively "Parties") agree as follows:
1. Recitals. The Recital!:! set forth. above are an integral part of this
Amendment No. 1 and are incorporated herein as if fully set out herein.
2. Amendment and Develuument Contract. This Amendment No. I and the
DevelvpuJ.ent Contract for Maple Glen 2nd Addition dated October 3,2005 are to
be read together to fully ascertain the obligation of the Parties. Amendment No. 1
does not invalidate or forgive any of Developer's obligations set out in the
DevelvpJ.Uent Contract. Together, the Develv!-,J.Uent Contract and Amendment No.
1 govern the Developer's obligations with respect to the Plat of Maple Glen 2nd
Addition.
2.1 If a provision in this Amendment conflicts with a provision in the
Development Contract, the provision that most protects the rights of the City,
public and individuals who purchased lots in Maple Glen 2nd Addition shall
control.
3. Letter of Credit. To assure completion of the Developer Installed
Improvements and other requirements set out in the Development Contract the
Developer will provide the City with an Irrevocable Letter of Credit that meets the
requirements set out in paragraph 32 of the Development Contract by December 1,
2008. The Developer then has until August 15,2009 to complete the remaining
Developer Installed Improvements. The City retains all of its rights set out in the
DevelvpJ.Uent Contract regarding a default of the Developers obligations.
4. Petition for Citv to Comnlete Public Imnrovements. Tollefson
Development Inc. is the owner of twenty-three (23) undeveloped lots in Maple
Glen 2nd Addition. Tollefson Development, Inc. hereby petitions the City Council
to undertake completion of the public improvements in the Plat of Maple Glen 2nd
Addition.
5~ Consent to Snecial Assessment. Tollefson Development, Inc. will benefit
if the City agrees to complete the public improvements and therefore consents to a
special assessment, equally distributed, against its twenty-three (23) remaining lots
in the Plat. The amount of each assessment is estimated to be $12,616.00. Exhibit
2, attached hereto and incorporated herein, sets out how the proposed assessment
was calculated.
6. Waiver. Pursuant to its petition to the City to complete the public
improvements in the Plat of Maple Glen 2nd Addition and assess the costs against
the twenty-three (23) undeveloped lots in the Plat owned by Tollefson
Development Inc., and legally described in Exhibit 1 to this Amendment.
Tollefson Develvpment Inc. hereby waives its right to: (1) appeal the need for the
public improvements and (2) appeal the amount of the special assessment against
any of the twenty-three (23) lots.
7. City to Abandon Construction of Public Improvements. If the Developer
provides the City with a valid Irrevocable Letter of Credit by December 1, 2008
the Developer may request the City to abandon the public improvement protect, so
long as the City has not entered into any contracts relating to the public
improvements.
8. Freeze on Buildimz P"-U.lJts. No building p\Ju.l.lit will be issued for any of
the lots identified in Exhibit 1 without (1) the City first receiving full payment of
1/23rd of the estimated special assessment on the lot for the public improvement or
(2) the Developer providing the City with a new Irrevocable Letter of Credit.
9. Recording. This Amendment shall be recorded against each of the
twenty-three (23) lots identified in Exhibit 1.
10. Remittance of Soecial Assessment to City. Developer shall advise the
City when it has a signed purchase agreement for one of Developer's twenty-three
(23) lots and the date of closing. Prior to the closing the Developer shall provide
the City the full amount subject to assessment on the lot. If proceeds from the sale
of the lot are to be used to satisfy the amount subject to assessment, the closing
agent shall be advised to withhold the subject assessment from Developer's
proceeds from the sale and remit the same directly to the City, Attention: Larry
Poppler, Assistant City Engineer. Once payment of the assessment has been made
and funds received, the City will process a building p"-.lmit application for the lot.
11. Severabilitv. If any portion, section, subsection, sentence, clause,
paragraph, or phrase of this Amendment No. 1 is for any reason held to be invalideby a court of competent jurisdiction in Scott County, Minnesota, such decision
shall not affect the validity of the remaining portions of this Amendment No.1.
12. Amendments. There shall be no amendments to the Development
Contract or this Amendment No.1 thereto unless in writing, signed by the Parties
and approved by a resolution of the City Council. The City's failure to promptly
take legal action to enforce the Development Contract or Amendment No. 1 is not
a waiver or release of the City's LCJ.Uedies for a default set out in the Development
Contract.
Ln:i OF PRIOR LAKE
By:
Jack G. Haugen, Mayor
(SEAL)
By:
Frank Boyles, City Manager
DEVELOPER
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Its: v / I~,i:.- I?cs~r
By:
Its:
STATE OF MINNESOTA )
) ss.
COUNTY OF SCOTI )
The foregoing instrument was acknowledged before me this day of .
2008, by Jack G. Hauge~ Mayor, and Frank Boyles, City Manager, of the City of Prior Lake, a
Minnesota municipal corporation, on behalf of the corporation and pursuant to the authority
granted by its City Council.
NOTARY PUBLIC
STATE OF MINNESOTA )
(;\ I,. ~ ) ss.
COUNTY OF \W~1.UtI fA. )
The foregoin~ instrument was acknowledged before me this 1 ~~day of~~
2008, by )\\1)-:tl:L>>} t,tJ.WlowJ . and .
o Q...~u.. /
NOTARY PUBLIC / '.
DR..A1<l.bD BY:
City of Prior Lake
16200 Eagle Creek Avenue SE
Prior Lake, Minnesota 55372
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: PAULA D. BOWEN
: NOTARY PUBLIC - MINNESOTA
: My Commission Expires Jan. 31, 2010 i
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