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Home My WebLink About15.F.7. Reduction of Letter of Credit for Boulder Ridge JS F. I, CITY OF SHAKOPEE Memorandum TO: Mayor and City Council Mark McNeill, City Administrator FROM: Judith S. Cox, City Cler~ SUBJECT: Reduction of Letter of Credit for Boulder Ridge DATE: July 31, 2003 INTRODUCTION: City Council is asked to consider reducing the Letter of Credit to insure payment of the special assessments for public improvements constructed for Boulder Ridge. BACKGROUND: Mr. George Daniels, Developer of Boulder Ridge, is asking that his Letter of Credit (LOC) be reduced by 53% from $25,218.75 to $11,853. The $11,853 represents 47% of Lot 1, Block 3, Boulder Ridge. The LOC is expiring August 12,2003 and Mr. Daniels would like to renew it for the lesser amount. All Assessments for Boulder Ridge have been paid except for Lot 1, Block 2, with a remaining balance of $10,777.45 and Lot 1, Block 3, with a remaining balance of $24,958.29. Mr. Daniels has sold Lot 1, Block 2 and 53% of Lot 1, Block 3 and now only owns 47% of Lot 1, Block 3. (However, all of the assessments for Lot 1, Block 3 are against Mr. Daniels portion of the lot.) In the Developer's Agreement, dated December 19, 1997, Mr. Daniels petitioned the City to construct Vierling Drive between Marschall Road and the west boundary of the plat and provided the city with a LOC in the amount of25% of the estimate of the cost of the improvements attributed to Boulder Ridge, Exhibit A. (The developer to the south provided a cash deposit in the amount of 10% of the estimate of the cost of the improvements attributed to Crossroads Center.) The Developer's Agreement provides for three options to insure payment of special assessments: 10% cash deposit, no cash payment with accelerated assessment payments which is payment of assessments @150% prior to issuance of certificate of occupancy, and 25% letter of credit. Originally Mr. Daniels selected the accelerated assessment payment but latter changed it to the LOC. Reduction of Letter of Credit for Boulder Ridge July 31, 2003 Page 2 Original special assessments levied against Boulder Ridge amounted to $109,035.01 and the remaining balance is $35,735.74. Special assessments levied against Crossroads Center amounted to $327,104.97 and the remaining balance is $190,000. The remaining assessments for parcels in both developments is being paid one-tenth each year over the ten year assessment period. This is the first time such a request has been made. Usually parcels are sold prior to five years and the assessments are paid at the time of closing for each parcel. In the case of Boulder Ridge, Mr. Daniels sold the two parcels that still have special assessments against them with the understanding that the buyers are responsible for the assessments. The assessments are being paid over the 10-year assessment period. AL TERNATIVES: 1. Grant the request to reduce the LOC to $11,853, which represents the assessments for the 47% portion of Lot 1, Block 3 owned by Mr. Daniels. 2. Do not grant the reduction of the LOC continuing to retain 25% of the original estimate for the special assessments for Boulder Ridge, requiring that the original LOC be renewed. 3. Require the renewal of the original LOC and grant a reduction of the $25,218.75 LOC to $11,990.86 upon receipt of a LOC or payment of the special assessments from the property owner who owns the other 53% of Lot 3, Block 1. RECOMMENDATION: Alternative No.2 is recommended because it affords the City the greatest amount of security. RECOMMENDED ACTION: Discuss the request of Mr. Daniels and give staff direction. ~1/31/2003 10:37 FAX ~52 476 7293 CARISCH INC. I4J 002 TPG Real Estate, LLC 641 East Lake Street, #226 Wayzata, MN 55391 952 476 4036 July 31, 2003 Mr. Mark McNeill, City Administrator City of Sbakopee 129 Holmes Street South Sbakopee, MN 55379 Re: Reduction of Letter of Credit No 1693 BDM LLC Dear Mr. McNeill, I received a call from my bank, Anchor Bank, today regarding a Letter of Credit which was issued August 12, 1998 as a requirement of the Development Agreement signed December 12, 1997. Since the Letter of Credit was issued we have built Shakopee Commons Shopping Center and sold all of the lots in the Boulder Ridge Development to the following entities: Dairy Queen, Tires Plus, Walgreen's, Steak EscapelTaco John's, Prime Bank and Sand Companies. It has been a very successful development as a developerlproperty ovmer and I think a success for the City of Shako pee. We have good tenants that are successful and pay their monthly rent on time. In addition all tenants pay their monthly pro rata share of the expenses which includes Common Area Maintenance, Insurance and Real Estate Taxes and Assessments. This money collected for Real Estate Taxes and Assessments is escrowed and paid to Scott County on May 15 and November 15 each year. As a property owner I have a valuable asset, a viable entity that provides a cash flow and a great tax base for the City of Shakopee. T a.xes and assessments payable on this parcel for 2003 are $49,660 and go up considerably in 2004 based on the increased vallie of the center. Under Page 3 of the Developers Agreement we agreed to the Plan A Improvem.ents i.e. street construction, curbs, sanitary sewer, storm sewer, water main, street lighting, electrical system, paving etc. These improvements were completed in their entirety by the developer in 1999 On September 30, 2002 the amount of land owned by TPG Real Estate, LLC ovmer of Shakopee Commons Shopping Center(Block 3, Lot 1) was reduced in size by approximately 53% through an administrative lot split. This center land was resurveyed with two new legal descriptions(see attached, Parcell & Parcel 2) in order 07/31/2003 10:38 FAX 952 476 7293 CARISCH INC. @003 to provide for the sale of an outlot(Parce11). The origina1lot contained 115,108 sq ft. Edwin L. Bounds purchased 60,161sq ft or 53% which leaves the reminder of 54,947 sq ft owned by TPG Real Estate, LLC or 47%. According to the purchase agreement, page 4, Section 6, the Buyer(Edwin L. Bounds) assumed "All levied and pencllng special assessments shall be assumed bv the Buver at the Clos;ne- Date". This lot was sold and closed on September 30, 2002 I am not a large property owner but a small business person owning a parcel of real estate in a great city. I have been a part of your city since 1993 when we signed an option with Gloria Vierling to purchase and develop this parcel. I intend to be a viable part of your community now and for a long time into the future. The Letter of Credit ties up a large amolUlt of bank funds for me that I would like use to purchase, improve and renovate other properties. I ask the council to reduce the amount of the Letter of Credit by 53% to $11,853 and further reduce the amount to zero in 2 years eliminating the Letter of Credit. Thank you for your consideration of this matter. 07/31/2003 10:38 FAX 952 476 7293 CARISCH INC. ~004 '.': ~' ;''': \"-;.~'-:- Proposed Legal DescrIptIon For pgrce I t (January 29. 2002) That part of Lot I. Block 3. BOULDER RIDGE. accordIng to the recorded plat thereof. Scott County. Minnesota. lying westerly of the following descrIbed 1100 and It's northerly and southerly extensions: Commencing at the northeast corner of said Lot 1 : : thence westerly. along the northerly line of said Lot 1. a distance of 230.77 feet to the point of be~JnOlng of the line to be described; thence deflectln9 0 the ~J;;j') left 89 degrees 50 minutes 56 seconds. g distance of 240.01 feet to the southerly lIne of saId Lot 1 and said lIne there terminating. .,) \b\) /\ Do.\. Q Proposed Legal Description For Parcel 2 (January 29. 2002) Thot part of Lot .t. Block 3. BOULDER RIDGE. according to the recorded plat thereof " Scott County. Minnesota. lyIng egtterly of the following described lIne and It's northerly and southerly, extenslons~ CommencIng at the nor,theas t corner .of said Lot 1 : thence westerly. alo~g the northerly lIne of saId Lot t, Q distance of 230.77 feet to the point of begInnIng of the line to be descrIbed: thence deflecting to the left 89 degrees 50 mInutes 56 seconds, a distance of 240.01 feet to the southerly line of soid Lot 1 and ,\~C1' saId lIne there termInating. -\,,0 00 ! Areas; Proposed Parce( I - 60.1,61 ~ sq. fl or 1.38 Y- acres Proposed Parcel 2 CI 54,947 Y- sq. ft. or 1.26 ~ acres " < Totgl Area= 115.108 ~ sq. ft. or 2.64 ~ acres i' " > ", ~ :. , .' I:: \<, .\< " :.' .. .'. '. . , , .~ ':~I;~~:~ ~ :~.,:~.,".:, .' ~~ ~:)I.~':';f;~~' , I .(lJ;"fi,.j;~ ,j.. :. 'mS',~~"<" , ~ ":.:~i,;.:~i::' ;;:-:' j ~: :'; .. . '~ ' .' . ::.~: : '. ~ @006 . AX 952 476 7293 CARISCH INC. -----91/31/2003 10:38 F - . - - --. " ,......,.",-,-",. 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I4J 007 ,/ r( /" "' ;> 4 ~ ~ b~ {~CCO of such woiver by au,... fD Seller, Selle< and Buyer sball, sul!iect fDlhe conditions set furtb herein, f perfonn this ~t ~fD its 9 6. Real E8b1te" d'S' Assessmenu. estBretaxes due and payable in the year tJ of closing of1his sale payable therewith appo oned between Buyer and Seller as of the Closing Date, with the resuh that Seller'shall pay that portion of such taxes attributable to the period of time prior to such dare and. Buyer shall pay that portion of such taxes attributable 10 the peri04 of time commencing with such date. Real estate taxes due and payable in the year prior to the year of closing and all prior y~ on the Property shall be paid by Seller. Rea1 estate taxes due and payable after the Closing Date shall be paid by Buyer. AU levied and pending special assessments shall be assumed by the Buyer at the Closing Date. 7. Warranties and Representations of Seller. To induce Buyer to purchase the Property, Seller warrants and represents to Buyer the following: 7.1 To the best of Seller's knowledge and belief, at the time of execution by Seller of this Agreement, there are no environmental proceedings, applicatio~ ordinances, petitions, court pleadings, resolutions, investigations by public or private agencies, or other matters pending which c:;ou.ld prohibit, impede, delay or adversely affect the use of the Property. 7.2 To the best of Seller's knowledge and belief: no Hazardous Substances have been, or pending the closing shan be. installed, used, incorporated into, discharged, released. S1O~ genenrted, disposed of;, or allowed to escape into or upon the Property. 7.3 To the best of Seller's knowledge and beli~ no investigation, administrative order, consent order or agreement, litigation, or settlement with respect to Hazardous Substances is proposed, threatened, anticipated or in existence with respect to the Property. 7.4 To the best of Seller's knowledge and belief, the Property C()Iflplies with all applicable Laws and Regulations (as herein above defmed). No notice has been scNed on Seller from any equity, governmental body or individual claiming any violation of any such Law or Regulation. Seller agrees 1hat the truthfulness of each of the representations and warnmties contained in this Paragraph 7 is a con4ition precedent to the performance by Buyer ofBuyets obligations hereunder and that said representations and warranties shall be true as of the date hereof and on 6 the Closing Date. Upon a material breach of any representation or warranty, Buyer, prior to the Closing Date, may declare this Agreement to be null and void, or Buyer may elect to close this purchase and sale and waive any such breach. If Buyer elects to declare this Agreement null and void, neither party shall have any rights or obligations hereunder, except that all Earnest Money shall be promptly refunded to Buyer. 8. J'ermitted Access and In!lPediOD. Buyer's performance of this Agreement is expressly conditioned upon Buyer's inspection and approval of the Property, which inspection shall be made by May 1, 2002. During the term of such inspection, Buyer and its authorized representatives shall be permitted access to the Property at reasonable times for the purposes of architectural inspection and design studies, and such soil borings and environmental assessment as are deemed. necessary by Buyer. Buyer agrees to indemnify and defend Seller from, and to hold Seller hannless against any and all claims. causes of action or expenses, including attorney's fees, relating to or arising from Buyer's presence on the Property prior to the Closing Date. Buyer agrees to repair any damage to the Property caused by such inspections and to retum the Property to substantially the same condition as existed prior to Buyer's inspection. If said inspection is, in Buyer's sole discretion, unsatisfactory to Buyer, Buyer shall notify Seller of the same in writing by May 1,2002 this Agreement shall be null and void. Buyer shall be entitled to actual possession of the Property on and after the Closing Date. 9. Condemnation.. In the event that, prior to the Closing Date, all or any portion of the Property shall have been affected by a condemnation or taking by eminent domain, or shall be subject to any condemnation proceeding which shall have been commenced or of which Buyer or Seller shall have received actual or constructive notice, Buyer or Seller, at their individual option, may terminate this Agreement within thirty (30) days of the date of such notice, in which event the Earnest Money shall be returned to Buyer, and upon such return neither party shall have any further rights, duties, obligations or liabilities, at law or in equity, ~" (XHlt4JtT "A 1# Doc. No. 9j 851- File g Ofp 9- Volume. q 3 page/~0 Cert "-3101/-'1- OFFICE OF R~GISTRAR OF TITLE SCOT!' COUNTY. MINNESOTA This is the filing information of the document flled in this office on 10-- ~r.{ -9 7 /0 "~If M. Pat 8oeckman. Registrar of Titles ~~~~ Tnis sn~ce reserved for recordina ourposes. Rev. 3/29/77 Drafted by J.~Lo: Rev. 4/6/77 City of Shakopee Rev. 4/11/77 CITY OF SHAKO PEE 129 Holmes St. S. Rev. 4/18/77 Shakopee, MN Rev. 6/1/79 SCOTT COUNTY, MINNESOTA Rev. 9/10/80 Rev. 6/29/82 DEVELOPER'S AGREEMENT Rev. 11/1/88 THIS AGREEMENT, Made and entered into this J'1tt..... day of o J~)-f./t~ , 19.1.:2-, by and between the City of Shakopee, a municipal corporation organized under the laws of the State of Minnesota, hereinafter called "City" and BDM LLC, a Minnesota corporation, hereafter called "Developerll. WITNESSETH: WHEREAS, the Developer has made application to the City Council for approval of a plat of land within the corporate limits of the City described as follows: Boulder Ridae hereafter called the "subdivisionlli and WHEREAS, the City Council, by Resolution No. 4756 adopted October 7, ~997, has granted conditional approval to the subdivision on the condition that the Developer enter into this Agreement to provide for the installation of street, water, sewer and other improvements as described herein. 1 J ~ J; ~, -"" , final acceptance of the Plan A Improvements, said guarantee to be in writing and in addition to the Maintenance Bond required by Paragraph 8D. VI. Plan B Improvements The Developer has petitioned the City for the installation of Plan B. Improvements as listed. Description of Improvement Location of Improvement A] Street Construction Vierling Drive between ~arschall Road and the west boundary of the plat B] VII. plan B Improvements. Plan B Improvements shall be instituted, constructed and financed pursuant to M.S.A. 429 Improvement Projects as follows: (A) Construction Plan and Approval Thereof The City will engage a duly registered professional civil engineer authorized to practice within the State of Minnesota to prepare detailed plans, specifications, and a cost estimate for complete installation of all Plan B Improvements, in accordance with City Design Criteria and Standard Specifications and submit same to the Shakopee Public Utilities Manager, when required. (B) Initiation Prior to execution of this Agreement, the Developer shall submit to the City Council a Petition as provided for by M.S.A. 429.031 subdivision 3, requesting that Plan B Improvements be made and assessed against the benefited properties, and that he agrees to the provisions of VII (E) (1) , VII (E) (2 ) and VII (E) (3) herein. ( C) Construction Upon the City Council adopting a resolution determining the sufficiency of each petition, said Plan B Improvements shall be administered and constructed, in all respects, as other City improvements made pursuant to the provisions of M.S.A. Chapter 429 and other applicable statutes. That is: 1) The City shall have sole responsibility for administration of the project, 2) The City will not be 7 ~~3 .: .. shall in no way limit or be used to offset the Developer's obligation to pay the assessments as they come due for those lots which have not been transferred or for which occupancy permits have not been obtained, which obligation shall continue until such time as all assessments authorized herein have been paid in full. Upon the payment of the assessment on any lot, the City shall issue a release in recordable form so as to remove the recording of this agreement as against the particular lot, piece or parcel which such payment has been made, provided all conditions of this agreement have been met. 3) Payment Method Three ( :?,) . Twenty-five (25) Percent. Letter of Credit The Developer shall submit to the City a certified letter of credit approved by the City Attorney made payable to the City of Shakopee upon which the City may draw, in the amount of 25% of the city Engineer's estimated total assessment for all such Plan B Improvements, said letter of credit to be submitted upon execution of this agreement. If the Developer fails to pay any assessments, interest or penal ty as the same come due, the City may draw on said letter of credit for any such amounts not paid. Those assessments as levied shall be paid by the Developer of a future lot, piece or parcel owner to the City as special assessments levied against the benefited land. The letter of credit shall be renewed annually. I f not renewed, the City shall draw on all of the money in the existing letter of credit before it expires. The letter of credit shall be renewed annually. If not renewed the City shall draw on all of the money in the existing letter of credit before it expires. The letter of credit shall be terminated upon payment of all assessments due on developer owned lots and may be reduced to equal the actual amount of assessments due when 75% or more of the assessments have been paid. 13 ~~.3