05-24-1999 EDA - Laserfiche WebLink

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Council Member Marty read Section 7.5 indicating the developer agrees to furnish a performance bond, certified check, certificate of deposit, irrevocable letter of credit, or cash in amount of 150% of the cost of the property which is the financial guarantee. He asked if this means the City will be receiving funds of about $148,500. Housing Inspector Dorgan explained there are a few areas of the agreement that staff is working on with legal staff. He advised the City's housing replacement policy requires a security of 100% of the value of the lot, not 150% of the improvement. Commissioner Marty noted the Agreement indicates 150% of the cost of the property. Housing Inspector Dorgan stated the resolution allows staff to negotiate the agreement or staff can present the final agreement for Council consideration. Commissioner Marty noted that in the past the EDA has found not having a bond in place can result in an impact. He read Section 17.2(b), indicating the developer shall be immediately entitled to return of the earnest money heretofore paid in exchange for a quit claim deed if the EDA fails to consummate the transaction. He asked if they can retain the earnest money referred to in Section 7.5 which is 150% of the cost for the property. Commissioner Marty read Section 17.2(e), indicating the non -defaulting party may enforce the specific performance of this agreement, which action must be commenced within one year of the date of failure of a party to consummate the transactions contemplated herein. Commissioner Marty pointed out that later in the agreement, Section 20.3, indicates "subject to unavoidable delays, the developer shall substantially complete the construction of the minimum improvements by December 7, 1999." He stated it seems to him Section 17.2(e) indicates they have one year and Section 20.3 allows until December 7 of 1999. Housing Inspector Dorgan explained the intention of the earnest money is to secure and assure the project is actually completed. Section 17.2 allows the City, within one year, to cash in the escrow if the developer fails to complete the project. He noted the developer is required to have the home built by December 7, 1999 and if it is not built and an extension was not provided then the City can cash in the escrow and complete the project for them. City Attorney Long explained the earnest money is only $1,000 which they get back if the City fails to sell the property. If the developer fails to buy the property, then the City keeps the $1,000. He explained the performance money allows the City to complete construction of the building if the developer fails to do so. City Attorney Long explained they have to be allowed a certain period of time to cure a real estate defect which may be the result of the date discrepancy. Commissioner Marty stated it appears one section allows a period of one year while the other allows about seven months. He reviewed Section 17.3(a) regarding revesting the title in the EDA if the developer fails to carry out its obligations with respect to the construction of the 2 U:\CARIS\COUNCIL\MINUTES\MVEDA24.MAY