Loading...
HomeMy WebLinkAbout#17 - Four Corners 1st Addition STAFF REPORT DATE: 8/18/2020 REGULAR MOTION TO: City Council FROM: Kristina Handt, City Administrator AGENDA ITEM: Four Corners 1st Addition Development Agreement REVIEWED BY: Jack Griffin, City Engineer Ken Roberts, Planning Director Jared Shepherd, City Attorney BACKGROUND: In 2018, EN Properties, LLC (“Developer”) sought to develop parcels along Hudson Boulevard, including the property at 11530 Hudson Boulevard (“Property”), to be known as Four Corners. On July 17, 2018, the City Council adopted Resolution 2018-076 approving the Final Plat for Four Corners 1st Addition. As a condition of final plat approval, the Developer was required to enter into a development agreement with the City. As part of the Four Corners 1st Addition, the Developer entered into purchase agreement with Stillwater Area Public Schools (“School District”) for the Property for use as a school bus terminal. The School District applied for rezoning the property to Business Park which was approved by the City. The School District also applied for a zoning text amendment to allow “bus terminal” as a conditionally permitted use within the Business Park zoning district. On July 17, 2018, the City approved a Conditional Use Permit (CUP) by Resolution 2018-077. The Resolution allowed the Stillwater School District to operate a “School District Transportation Center,” a school bus terminal, from the property at 11530 Hudson Boulevard under certain conditions. The conditions included: “9) The property shall be connected to sewer and water prior to operation of the bus terminal.” The Developer and the City negotiated the Development Agreement, Four Corners 1st Addition, dated October 22, 2018 (“Development Agreement”) (attached), which required the Developer to build the water and sewer infrastructure and bring it to the Property (i.e., Subdivision Improvements) (“the Project”) and improve Hudson Boulevard along the property frontage. The Development Agreement required the Subdivision Improvements were required to be installed by October 31, 2019. On October 23, 2018, the School District closed on the purchase of the Property. In Fall 2019, the School District began utilizing the Property as its bus terminal. The Property was not connected to sewer and water prior to operation of the bus terminal. On May 5, 2020, the City Council adopted Resolution 2020-043, which revoked the School District’s Conditional Use Permit. The School District has vacated the Property. To date, the Property remains unconnected to sewer and water and Hudson Boulevard has not been improved. City Council – Staff Report Meeting date: 8/18/20 2 Project Update: The Project is currently secured by an Irrevocable Letter of Credit No. 158, issued by Premier Bank, in the amount of $ 1,136,805.00. The Bank confirmed orally that it automatically extended for a one-year term from October 22, 2019. The expiration date is, therefore, October 22, 2020. Since early summer 2020, the City has seen some action by the Developer, indicating that the Project might commence this year. On June 15, 2020, the City was provided with all of the necessary easements, in proper form, from adjacent property owners that were required for the installation of City utilities. On July 17, 2020, a preconstruction meeting for the Project was held via video conference. Pursuant to direction of the City Engineer and the small utilities, the Developer staked property corners and easements corners and alignment for sewer and water by Friday, July 31, 2020. The City has provided notice to Xcel Energy and Xcel Gas (by letters in June and July 2020) of the requirement to relocate their utilities for the project. The developer’s contractor has subsequently met on-site with each small utility owner as part of the relocation coordination efforts. By letter dated July 28, 2020, Xcel confirmed they were working on a plan for relocation and expected to have relocation plans and right-of-way permit applications within a few weeks. The Developer provided the contractor’s Project schedule in early August 2020, but it will need to be updated in light of the private utility relocation schedule. Status of Development Agreement: In approximately mid July 2020, legal counsel for the City and Developer began discussing an amendment to the Development Agreement. The City has notified the Developer, through counsel, that the City’s position is that the Developer is in default of the Development Agreement, chiefly, Section 11. The City has made three attempts to remedy this default by amendment, and each time, the Developer refused to execute an amendment. The most recent amendment, included the following major points: •The Developer shall install all required Subdivision Improvements by July 31, 2021, including all punch list work, and submittal of all final record drawing information in the city standard form and as acceptable to the City Engineer. •Project Commencement, physical construction and site work, utility pipe installation, shall begin within the same week that small utility work in the field is complete. •The developer is responsible to closely monitor the utility relocation work and to have his contractor prepared to mobilize accordingly. •The water and sewer utility pipes shall be installed within 8 weeks of Project Commencement up to and including boring under the natural gas pipeline. •All work must be substantially completed by July 31, 2021, including installation of all watermain, sanitary sewer and storm sewer utilities, installation of storm water drainage facilities, utility testing and televising, placement of non-wearing paving, wearing course paving, pavement markings and traffic devices, and restoration. City Council – Staff Report Meeting date: 8/18/20 3 • In accordance with Sections 11 and 31 of the Agreement, the Developer shall furnish a new irrevocable letter of credit or cash escrow in the amount of $1,766,526.00 (125% of estimated project costs) within 10 days of execution of this Agreement, in a form and with a financial institution that is acceptable to the City. ISSUE BEFORE COUNCIL: The City Council is being asked to provide direction to staff with respect to the Developer’s compliance with the Development Agreement. REVIEW/ANALYSIS: Section 11 of the Development Agreement provides for “Time of Performance.” It states the following: The Developer shall install all required Subdivision Improvements by October 31, 2019. The Developer may, however, request an extension of time from the City. If an extension is granted, it shall be condition upon updating the Security posted by the Developer to reflect cost increases and amending this Agreement to reflect the extended completion date. Section 26(F) of the Development agreement provides: The action or inaction of the City shall not constitute a waiver or amendment to the provisions of this Agreement. To be binding, amendments or waivers shall be in writing, signed by the parties, and approved by written resolution of the City Council. The City’s failure to promptly take legal action to enforce this Agreement shall not be a waiver or release. Section 28 provides for Remedies on Default as follows: Whenever any Event of Default occurs, the City, subject to any rights of third parties agreed to by the City pursuant to this Agreement, or otherwise by written, executed instrument of the City, may take any one or more of the following: A. The City may suspend its performance under the Agreement until it receives assurances from the Developer, deemed adequate by the City, that Developer will cure its default and continue its performance under the Agreement. Suspension of performance includes the right of the City to withhold permits including, but not limited to, building permits. B. The City may initiate such action, including legal or administrative action, as is necessary for the City to secure performance of any provision of this Agreement or recover any amounts due under this Agreement from the Developer, or immediately draw on the Security, as set forth in this Agreement. City Council – Staff Report Meeting date: 8/18/20 4 While the Developer has made efforts to commence the Project, the Developer has not timely performed the Development Agreement. The Developer is, therefore, in violation of Section 11 of the agreement. The City has been willing to enter into an Amendment to grant an extension of time, in accordance with Section 11 of the Development Agreement, but the Developer has also ultimately refused to execute any agreement negotiated between legal counsel. The City has not granted an extension of time under the Development Agreement and the Developer remains in violation of it. Additionally, any extension would require updated security. FISCAL IMPACT: The project is currently secured by an Irrevocable Letter of Credit No. 158, issued by Premier Bank, in the amount of $ 1,136,805.00. Section 30 of the Agreement also provides for special assessment of unreimbursed costs against lots in the Subdivision, and the waiver of right to a hearing by the Developers, and its successors, and assigns. Based upon our Engineer’s estimate of current construction costs, the Subdivision Improvements contemplated to be performed by the Developer would cost the City approximately $1,413,221.00. OPTIONS: The City Council is being asked to consider the approval of the developer’s agreement and has the following options: 1) Take No Action 2) Direct City Attorney to draft notice of default to Developer with opportunity to cure through all of following actions:1) commencing project within the same week that utility relocation work is complete; 2) Execution of Amendment to DA by no later than October 5, 2020; 3) Provision of New LOC in amount of $1,766,526.00 by no later than October 5, 2020. If the Developer does not cure the default through all of the above actions, City staff may enforce the agreement by drawing on the Letter of Credit, and utilizing any all other default remedies provided under the Agreement, and the City may perform the work. RECOMMENDATION: Staff recommends the City Council direct the City Attorney to draft a default notice to the Developer and enforce the Development Agreement if necessary. “Motion to direct the City Attorney to draft notice of default to Developer with opportunity to cure as recommended by staff and to provide for enforcement of the Agreement if the Developer does not cure the default.” ATTACHMENTS: • Four Corners 1st Addition Development Agreement • Premier Banks, Irrevocable Letter of Credit