12-16-2015 Council Packet - Laserfiche WebLink

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STAFF REPORT TO: Mayor Keis and Members of City Council FROM: Joel Hanson, City Administrator DATE: December 10, 2015 RE: Development Agreement Amendment – Pine Tree Ponds Project The City entered in to a development agreement with Masterpiece Homes, Inc. on October 17, 2013 relative to the 15 new lots in Pine Tree Ponds. Some key provisions of that agreement were as follows: • Assessments of $57,000 per lot were levied. They are paid when each lot sells. • The Developer had $100,000 of equity in to each lot. • Each property sold needed to have an estimated market value of $450,000 as of 1/2/17, or an actual selling price of at least $475,000 as evidenced by the certificate of real estate value, or a combine CRV that average greater than $475,000. $150,000 was retained by the City to guarantee compliance with this provision with $10,000 being released for each sale that complied with this provision. (See map attached that shows sale prices and EMV’s as of 1/2/15.) • Construction on three homes needed to be started by 12/31/13, a total of 10 homes needed to be started by 12/31/14, and all 15 homes were to be started by 12/31/15. • All homes were to be completed no later than 12/31/16. Any lots that did not have homes completed by 12/31/16 would result in the ownership of that lot reverting to the City. However, the Developer could gain an extension for another year by paying $4,706.55 to the City as reimbursement for lost TIF. Attached is a letter from Steve Peters of Masterpiece Homes, Inc. You will note that three properties do not have homes started as of yet. He goes on to indicate that they have deposits on two of the three lots and are planning on displaying their new model in the 2016 Builders Association Spring preview. Based on this letter, they will not be in compliance with the provision that all homes be under construction by the end of 2015. In looking at this issue in more detail, the City bears little risk. The key provision is that all homes need to be completed by 12/31/16 so they will be assessed as of 1/2/17. Barring a dramatic economic downturn, this does not appear to be an issue. Furthermore, if we couple that with the city gaining title to the non-compliant lots or the developer’s ability to purchase an extension, the City is in great shape on this project. (The average EMV of seven homes assessed averages over $550,000 versus the $450,000 requirement. The average selling price of the 11 homes sold to date averages over $560,000 versus the $475,000 requirement.)