2008-09-15 Gold Key Lot ReductionAlbcrtvill,c Mayor and Council Communication
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September 15, 2008
Subject: Gold Key Letter of Credit Reduction
RECOMMENDATION: It is respectfully requested the Mayor and Council consider
staff s recommendation to adopt a Resolution for a reduction in the Letters of Credit
posted by Gold Key as follows:
• Reduce the $680,337.00 letter of credit to $217,469.37 ($190,387.53 plus
$20,000.00 retainage for the ditch plus $7,081.84 for unpaid City bills).
• Reduce the $53,000.00 letter of credit to $34,000.00
• Keep the $58,200.00 letter of credit at its current amount until the remaining
amount of landscaping installation has been determined.
BACKGROUND: In light of the recent Court ruling in the litigation against Gold Key,
and upon the advice of myself and Iverson Reuvers, the firm representing the City in the
Gold Key litigation, City Staff is recommending a reduction in the letters of credit
submitted by Gold Key pursuant to the terms of the Developer's Agreement. Gold Key
originally submitted three letters of credit in the following amounts:
A $680,000.00 letter of credit representing a 50% security for the special
assessments levied against the properties. Under the Developer's Agreement, this
letter of credit may be reduced in proportion to the special assessments paid. To
date, 72.02% of the special assessments have been paid. Reducing this letter of
credit by 72.02% would leave a letter of credit balance of $190,387.53.
A $53,000.00 letter of credit for "on- and off -site improvements", which was
calculated at $1,000 per lot for items such as bituminous driveways, sod and trees
on each lot. To date, 19 lots have been completed. Reducing the letter of credit
calculation by 19 lots would leave a letter of credit balance of $34,000.00.
A $58,200.00 letter of credit for landscaping, representing 150% of the estimated
cost of the landscaping improvements required. To date, all of the evergreen trees
that were required to be installed have been, as have the landscaping
improvements in the entrance median. However, only a handful of the shrubs
have been installed and four of the evergreen trees have since died. The
Developer needs to replace the four dead trees and install the remaining shrubs.
At this point we do not know the amount by which this letter of credit should be
DEVELOPMENT TEAM — describe
Understood it complied with plans approved by city, why not ignore the
problem.
What was the city' primary concern
Not some culvert guy — elevation number came from COUNTY.
11/29/05 Letter sent — team decision?
Meeting — attempt to work it out
TELL jury what you were hoping to do to alleviate the issues?
Did you think you had resolved problem?
Suit came in May of 2006 — surprised? Why?
12/06 Letter — why sent?
DAMAGES
Some of damages claims by Gold Key are for taxes, interest penalties for real estate taxes
and assessments. To your knowledge paid? To avoid, 10% penalty that is imposed by
County, all need to do is pay the taxes.
LETTERS OF CREDIT:
$680K Municipal improvements
$53K on and off site improvements
$58,200 Landscaping
REDUCED — 9/4/07 Resolution
Mowing —Gold Key not mowing lots. Is that a problem? Why?
Cost to City
Bills
Conversations with Dean
Special Assessments
Who paid for those?
Gold Key agreed to pay?
What has City had to do in face of this?
In light of Gold Key's actions, any plans to fund the public improvements for a
subdivision in the City of Albertville in the future?
STIGMA — aware of any?
Mayor and Council Communication — September 4, 2007
Gold Key Letter of Credit Reduction
Page 2 of 4
reduced, as the prices originally submitted for the landscaping are now three years
old. Staff recommends no reduction in the landscaping letter of credit at this time,
but we will be requesting that the Developer submit a contractor's current quote
for the replacement of the four trees and the installation of the remaining shrubs.
Upon review and recommendation by Staff, a reduction in the landscaping portion
of the letter of credit would then be brought back to the City Council for
consideration.
• The City Engineer recommends that the City retain an additional $20,000.00 in
letter of credit amount for the required separation of an existing east -west
drainage ditch from the storm water ponds on this site as a potential fix to some of
the drainage violations on this plat as cited by the MPCA. This amount should be
retained in the $680,337.00 letter of credit.
• In addition, the Developer owes the City $7,081.84 in unpaid consultant bills.
This amount should also be retained in the $680,337.00 letter of credit.
KEY ISSUES:
• Compliance with the Court Order and City Development Agreement.
POLICY CONSIDERATIONS: The City enters into Development Agreements
outlining the terms and conditions of payment and Letter of Credit Reductions. This
action is consistent with past practices.
FINANCIAL CONSIDERATIONS: The reduction in the letters of Credit for
completed work that has been accepted by the City Engineer has no financial
implications for the City.
LEGAL CONSIDERATIONS:
The City has the legal authority to reduce the letters of credit pursuant to the Developers
Agreement and advice of our City Engineer and Attorney. While the City Attorney and
special counsel are recommending that the City reduce the letter of credit, the proposed
reduction will reduce the amount of security that would be available to the City to cure
the defects the City believes remain in the design of the plat. However, the City would
only be able to draw on the letters of credit for that purpose if the District Court's
decision were reversed on appeal and the City ultimately prevailed in this case. With no
opportunity to file an appeal at this time, it may be several years and several Court
decisions before we could be in that position. Given the lengthy time periods involved,
Staff believes that granting the reductions set out in this memo is the best course of action
at this time.
Respectfully Submitted
C:\Users\jkuboushek\AppData\Local\Microsoft\Windows\Temporary Internet Files\OLK8989\09 04 2007 Gold Key Letter of Credit
Reduction RCA.doc
Agenda Item No.
Meeting Date September 4, 2007
Mayor and Council Communication — September 4, 2007
Gold Key Letter of Credit Reduction
Page 3 of 4
Larry R. Kruse
City Administrator
Department/Responsible Person: Finance Director Lannes
Attachments: Draft Resolution
Draft Resolution
CITY OF ALBERTVILLE
COUNTY OF WRIGHT
STATE OF MINNESOTA
RESOLUTION NO.2007-
RESPOLUTION AUTHORIZING REDUCTION IN GOLD KEY'S LETTERS OF
CREDIT FOR THE PRAIRIE RUN DEVELOPMENT
WHEREAS, Gold Key has a $680,000.00 letter of credit representing a 50% security for
the special assessments levied against the properties; and
WHEREAS, Gold Key has a $53,000.00 letter of credit for "on- and off -site
improvements", which was calculated at $1,000 per lot for items such as bituminous
driveways, sod and trees on each lot.; and
WHEREAS, Gold Key has a $58,200.00 letter of credit for landscaping, representing
150% of the estimated cost of the landscaping improvements required.
NOW, THEREFORE be it resolved by the City Council of the City of Albertville,
County of Wright, State of Minnesota reduce Gold Key's Letters of Credit as follows:
• Reduce the $680,337.00 letter of credit to $217,469.37 ($190,387.53 plus
$20,000.00 retainage for the ditch plus $7,081.84 for unpaid City bills).
• Reduce the $53,000.00 letter of credit to $34,000.00
C:\Users\jkuboushek\AppData\Local\Microsoft\Windows\Temporary Internet Files\OLK8989\09 04 2007 Gold Key Letter of Credit
Reduction RCA.doc
Agenda Item No.
Meeting Date September 4, 2007
Mayor and Council Communication — September 4, 2007
Gold Key Letter of Credit Reduction
Page 4 of 4
Keep the $58,200.00 letter of credit at its current amount until the remaining
amount of landscaping installation has been determined.
Adopted by the Albertville City Council this 4th day of September,2 2007
Ron Klecker, Mayor
Bridget Miller, City Clerk
C:\Users\jkuboushek\AppData\Local\Microsoft\Windows\Temporary Internet Files\OLK8989\09 04 2007 Gold Key Letter of Credit
Reduction RCA.doc
Agenda Item No. _
Meeting Date September 4, 2007
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