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2008 Pond Project to Lenhardtr~ Michael C. Couri~ Andrew J. MacArthur Robert T. Ruppe~~ *Also licensed in Illinois **Also licensed in Califi~rnia Apri12, 2008 Mr. David Lenhardt 12725 43rd Street, N.E. St. Michael, MN 55376 COURI, MACARTHUR & RUPPE, P.L.L.P. Attorneys at Law 705 Central Avenue East PO Box 369 St. Michael, MN 55376-0369 (763) 497-1930 (763) 497-2.199 (FAX) courimacarthur@earthlink. net Re: City of Albertville; Albert Villas Pond Project. Dear Dave: Kristen H. Carr Kyle R. Hartnett I have received your letter of February 26, 2008 and have discussed its contents with City Staff.. As you. can imagine, Albertville disagrees with many of the conclusions in your letter and simply recalls the facts differently than those stated in your letter. To begin with, Albertville obtained the option to purchase the 40 acre property that the pond is now located on without any idea that the School District would be interested in the property. Albertville's Staff had initially calculated that the pond could be designed into the 40 acre property in such a manner that the remainder of the property could be developed for residential use with very nice pond views that would allow the City to eventually recoup a large portion of the pond cost. Shortly after Albertville obtained the option, Albertville Staff met with Dr. Ziegler at Albertville's City Hall at Dr. Ziegler's request to discuss the possibility of the School District purchasing this property. That date was February 14, 2006, and I was present at this meeting. I distinctly recall Dr. Ziegler stating that the School District's representative had contacted the previous owner of this property and was told that the property was not for sale, that the School District was interested in buying this property, and that the School District believed that the addition of this property would result in a much nicer campus than was planned at the time. I also. recall Dr. 'Ziegler stating that the average purchase price of the properties the SchoolDistrict had acquired at this site was approximately $51,000..00 per acre. Given that the School District ultimately purchased more than 31 acres of option property, Albertville's option price of $40,000.00 per acre represented a savings of about Mr. Dave Lenhardt Apri12, 2008 Page 2 of 8 $330,000.00 to the School District when compared to the price it paid for the surrounding properties. Contrary to the School District's assertions, the School District did not change its plans to accommodate Albertville; rather, Albertville changed its plans to accommodate the School District's desires. In fact, at the time the City Council was considering selling its option to the School District, I advised the City Council against selling the option to the School District as I believed that it would severely limit the City's options and ability to ultimately construct the. pond it needed. St. Michael's requirement that Albertville pay St. Michael $428,000.00 in order to get permission to build the pond was a clear manifestation of these limitations that I do not believe Albertville would have faced if it owned the 40 acres outright. Please do not misunderstand me. I advised the City Council based purely on what would put the City in the best legal position. The City Council made its decision to sell its option to the School District from the perspective of what would be best for the entire community. I raise this issue to dispel the notion that the School District accommodated the City of Albertville in buying the City's option. As you can see, even with the combined bidding of the pond with the high school project, the total cost to the City of Albertville is not materially different than it would have been had the City kept the 40 acre property, built the pond, provided the remainder with sewer and water service and sold the remaining residential portion. However, the $330,000.00 savings to the School District as a result of buying cheaper land is a real cost savings to the School District. As to the specific items raised in your letter that we appear to disagree on, I will address them in the order they appear in your letter. 4. Offset for Ponds. The School District's ponds located in the City of Albertville are not for the benefit of Albertville, but instead are required to be constructed by State law. While Albertville's engineer did consent to the location of these ponds where they were constructed, he did so because the alternative would have been to put this ponding in the large pond, which would have displaced the space available to Albertville. Under the Option agreement between Albertville and the School District, Albertville had the right to purchase in fee simple the area shown on Exhibit D, approximately 15 acres of land. As the high school site design was being firmed up, the School District continued to encroach upon these 15 acres until less than 8 acres of ponding land was left. Albertville's engineer consented to the location of the ponds in Albertville because the School District had already so reduced the area available to Albertville that any further reductions would jeopardize Albertville's ability to achieve meaningful flood relief results from its ponding project. The Albertville locations were permitted not as an Mr. Dave Lenhardt April 2, 2008 Page 3 of 8 accommodation to the City, but as an accommodation to the School District-essentially, it had to pond for this drainage but had nowhere to pond for it had Albertville not allowed it to be located in Albertville or had Albertville insisted on retaining the original 15 acres the School District agreed to sell to Albertville. From the start of this entire process, both the School District and the City had stated as their goal that neither entity subsidize the other entity and that each pay its own way. Having each party pay for the ponding capacity used on the other's property is consistent with this position. Albertville cannot justify to its residents that it is paying the School District $42,762.73 per acre for land that Albertville is using for ponding purposes while the School District pays nothing for Albertville's easement land that the School District is using for ponding purposes. Offsetting these costs is both logical and fair to both parties. 5. Trunk Fees. While your interpretation of paragraph 2A of the Option Agreement is creative, it is not consistent with the plain language of that paragraph. That paragraph states: "Development of the Subject Property [defined in the Option Agreement as all of the School District Property] shall be subject to AlbeNtville's Sanitary Sewer Trunk Line Fees and Municipal Water Trunk Line Fees." (Emphasis Added). Section 9-1-2-1 of the Albertville City Code (Water Trunk Access Charge) states as follows: D. Amount Of Charge: The municipal water trunk access charge shall be one thousand nine hundred twenty five dollars ($1,925.00) per gross acre of land which is subdivided or connected to the water system. E. Method Of Calculating Charge: The municipal water trtxnie access charge shall be based on the gross area of land on the plat or other property being subdivided, including all outlots. The city council shall have the power to change the basis on which such charges are calculated. Section 9-1-2-2 of the Albertville City Code (Sanitary Sewer Trunk Access Charge) states as follow: D. Amount Of Charge: The sanitary sewer trunk access charge shall be two thousand fifty five dollars ($2,055.00) per gross acre of land which is subdivided or connected to the sewer system. Mr. Dave Lenhardt April 2, 2008 Page 4 of 8 E. Method Of Calculating Charge: The sanitary sewer trunk access charge shall be based on the gross area of land on the plat or other property being subdivided, including all outlots. The city council shall have the power to change the basis on which such charges are calculated. Both of these sections calculate trunk charges on gross acrea~, not net acreage. The language limiting the application of the trunk charges to no more than 115 acres is a limitation on the gross acreage such that it will not exceed 115 acres. Without this limitation, the acreage subject to trunk charges would be somewhere in the neighborhood of 150 to 160 acres. Your interpretation attempts to use the (imitation to destroy the entire rule in favor of some undefined notion of what acreage is subject to the trunk charges. Put very simply, the ordinance requires that all acreage in a development be subject to the trunk charge, but allows the City Council to limit that application. That is exactly what the City agreed to in this case. The limitation cannot swallow the rule. In addition, your assertion that it was never the School District's intention or expectation that it would pay trunk fees on acreage-which is used for athletic fields is not consistent with the fact that Dr. Ziegler is the person who originally requested that a limitation be applied based on the fact that a certain number of acres of the School's property were wetlands or were going to be left in their natural, wooded state. In fact, Dr. Ziegler provided the 115 acre number on Apri16, 2006 in response to Albertville's request as to how much of the School's property Dr. Ziegler believed the trunk charges should apply to. The SAC and WAC charges noted in your letter are entirely separate from trunk charges and serve a different purpose than trunk charges do. While some cities may use SAC and WAC funds to supplement trunk funds, Albertville does not. As to the past trunk charges the School District has paid, it is true that no trunk charges were paid by the School District for the high school constructed in 1992. However, the School District was special assessed $68,805.43 in December of 1992 as its share of the cost of providing sanitary sewer service to the School District via a trunk line extension. This assessment included costs that correspond to trunk charges today, and was in addition to SAC and WAC charges that were also collected in 1992. My recollection from the time of the special assessment in 1992 was that the School District's architect appeared at a City Council meeting seeking to have the assessment cancelled as the School District had not budgeted any assessment amount in their construction budget. The City Council's response was that the School District had been notified approximately a year before regarding the proposed special assessment and that the City had already Mr. Dave Lenhardt Apri12, 2008 Page 5 of 8 committed itself to issuing a bond to pay for the improvement, and thus could not cancel the assessment. The situation today is somewhat similar. The School District entered into the Option Agreement with the City in April, 2006, where the exact amount of the trunk charges ($3,000.00 x 115 acres). was .spelled out. Subsequent to that agreement, the City entered into an agreement with St. Michael to pay $428,000.00 for permission to construct the pond, agreed to pay for pond construction, and issued a bond to fund these costs. Having already committed to these expenditures, the City is not now in a position to forego a significant amount of the revenue that the City has counted onto offset its costs. Because the City has already incurred or committed to these costs, in particular the $428,000.00 to the City of St. Michael, Albertville is in no position to be able to reduce the trunk fees as requested by the School District. 7. Road and Waterline Construction. Albertville has previously paid $37,006 to the School District for water line and road construction costs. These were presented to Albertville as all of the costs incurred by the School District for this particular stretch of road. Albertville is unaware of any additional costs incurred by the School District. If there are additional road costs, please forward them to Albertville's City Engineer for review and recommendation to Albertville's City Council. 9. En ing eering_Bills. Contrary to the assertions in your letter, the School District has required Albertville to reimburse the School District for its consultant fees. In particular, Albertville paid Donlar Construction $2,444.40 in additional fees related to Donlar's supervision of the pond construction. While Albertville believes that Donlar incurred no additional expense in supervising the pond construction, Albertville paid the bill because its payment was consistent with Albertville's prior understanding with .the School District that neither party was to subsidize the other. While Albertville appreciates the fact that ARY did not bill the. School District additionally for its time devoted to the pond issue, it is Albertville's understanding that ARY's fee is percentage based, and thus the School District's expenses to ARY did not increase with the addition of the pond project. In contrast, Albertville's engineering fees represent fees actually paid by Albertville for Bolton & Menk to review the School District's utility plans and the. connection of the School District's utilities to the City's sewer and water systems. These fees are directly attributable to the School District's connection to Albertville's water and sewer lines. Mr. Dave Lenhardt Apri12, 2008 Page 6 of 8 In addition, your assertion that St. Michael has never imposed engineering fees on the School District appears to be incorrect. When the School District pulled its building permit from St. Michael, it deposited an escrow of $111,825.00 to cover St. Michael's engineering expenses associated with the construction of the high school building. As Albertville has stated in the past, if St. Michael does not charge the School District for St. Michael's engineering, we believe Albertville's City Council would do the same. However, in light of the fact that the School District has already paid St. Michael an escrow of $111,825.00, we believe that the School District has already paid a substantial amount of engineering fees incurred by St. Michael. Albertville's fees should not be treated differently. 10. Borrow Minim. In my first letter to you, I noted that Albertville's Staff would be willing to recommend that Albertville's City Council seek no remuneration from the School District as a result of this borrow mining. City Staff was willing to recommend this in a spirit of cooperation with the School District. Your response to the City's accounting of this matter has been less than cooperative. If the School District maintains its position that it should not have to pay the previously agreed upon amount of trunk charges on 115 acres of land, Albertville's Staff will recommend that the City seek to offset the additional costs the City incurred in excavating the soils that the School District was obligated to take from the pond site rather than import from the City of St. Michael or excavate from elsewhere on the site. Rough calculations put that amount of borrow at 55,000 cubic yards, which would equal an additional $55,000.00 owed to the City (at approximately $1 per square yard). Contrary to the assertion in your letter, the City was under no obligation to notify the School District that it objected to the mining, and in any event, the City did not find out about the borrow mining and importation of fill until after it had been completed. The School's obligation to rr~ine any b~~rrow needed on the site from the pond remains a binding obligation upon the School District without any additional action from the City. 11. Payment for Pond Excavation. In reviewing its records recently, Albertville has noticed that it has not been invoiced by the School District for the pond excavation itself, and thus Albertville has not yet paid the School District for the pond excavation work. Again, in an effort to wrap up all costs related to this transaction in a manner that is fair and consistent with the terms of the Option Agreement, the City would like to include those costs in the final settlement of this matter. It is our understanding that those costs were $157,000.00. The addition of these costs to the worksheet included in my previous letter yields the following results: Mr. Dave Lenhardt Apri12, 2008 Page 7 of 8 Due to Due to School District City Land cost--pond $328,845.40 $ 30,789.17 Wetland credits $ 9,632.00 Land cost--berm $ 18,387.97 Option consideration $ 5,000.00 Trunk fees $ 345,000.00 Overpaid Invoice $ 1,250.00 Utility Engineering $ 3,267.00 Pond Construction $157,000.00 Total $513,865.37 $ 385,306.17 Net Due from City to School District $128,559.20 Note that the amount due from the City to the School District will be reduced to $73,559.20 if the $55,000.00 in costs associated with the borrow material are added as a credit to the City per the terms of the Option Agreement. Albertville's Staff would like to meet with Dr. Ziegler, Mr. Rego and yourself to go over the issues raised in the letters and see if we can agree on a common recommendation to our City Council and your School District Board. Please have Dr. Ziegler contact Larry Kruse to arrange a time and place for this meeting. Please contact me with any questions you may have regarding the issues raised in this letter. Thank you. Sincerely, ~~ Michael C. Couri Couri, MacArthur & Ruppe, P.L.L.P. Mr. Dave Lenhardt April 2, 2008 Page 8 of 8 Enclosures Cc: Larry Kruse Tina Lannes Adam Nafstad