Adopt Resolution # 16-07-131 Approving Development Agreement for Station; Case of D.R. Horton, Inc.

NOTE: This case was revised on Friday, July 8. Most amendments to the Development Agreement are technical in nature, and supported by City Staff. However, new to the case is a request from D.R. Horton for reimbursement in the amount of $37,883.50 for previous Stage I Improvement obligations related to the original Ramsey Town Center Master Development Agreement.

The purpose of this case is to approve the Development Agreement for Station, a Major Plat for a seventy-seven (77) unit townhome development by D.R. Horton.

The City Council approved the Final Plat for this project on June 28, 2016. The approval was contingent upon the Developer entering into a Development Agreement outlining construction and surety requirements. The draft Development Agreement is now ready for final consideration.

Notification not required.

There are a few items on this development that are impacted by the previous Master Development Agreement for Ramsey Town Center and associated Secondary Development Agreements with secondary developers at the time, such as D.R. Horton. The Master Development Agreement (since repealed) placed the obligation for 146th Avenue (which is lacking a final lift) and area public sidewalks (not completed on Ramsey Parkway, Peridot Street, and 146th Avenue) on RTC, LLC. A Secondary Development Agreement with D.R. Horton reiterated these obligations as those of RTC, LLC. The Master Development Agreement also included a Letter of Credit related to required improvements. Said Letter of Credit has since been exhausted through other obligations left uncompleted by RTC, LLC. Furthermore, these improvements now fall under public rights-of-way and public ownership. Finally, D.R. Horton has produced a letter from the former City Attorney outlining a cost-share agreement where the City would agree to constructing two (2) of the three (3) public sidewalks.

Due to the lack of financial security to complete previous RTC, LLC obligations associated with this Development, there are arguments on both sides on which party is responsible for completing these improvements. D.R. Horton has taken the position that these obligations now fall on the City due to the original Master Development Agreement, as the original Letter of Credit was intended to cover these obligations.

In order to keep the project moving forward, D.R. Horton has offered to cost-share in the completion of these improvements. D.R. Horton proposes to complete the improvements, and be reimbursed for a portion of the cost. The cost share is proposed as follows:

1. D.R. Horton
   1. Final Lift on 146th Avenue ($13,417.60)
   2. Split Cost on public sidewalks ($19,319.60)
2. City of Ramsey
   1. Base Course and Curb/Gutter Repair on 146th Avenue ($7,500)
   2. Split Cost on public sidewalks ($30,383.50)

Final note: this scenario exists in one (1) other known development from the original Ramsey Town Center (Ramsey Town Center 7th Addition/Symphony at Town Center by K Hovnanian). K Hovnanian is anticipating to sell their remaining asset. It is anticipated that this same settlement offer would be submitted to this Developer as well.

Alternatives

Alternative 1: Approve Development Agreement. The Agreement is a required tool that clarifies construction obligations of the Developer as a result of the City's approval of the Final Plat. It is a standard step in all new developments. The cost share on required improvements that were obligations of RTC, LLC under the previous Master Development Agreement seems reasonable (due to the fact that is was covered under multiple contracts recorded against the property). Unfortunately, there were more uncompleted obligations from RTC, LLC than the original Letter of Credit could cover.

Alternative 2: Approve a Revised Development Agreement. The Agreement has been reviewed by the City Attorney. At this time, Staff does not anticipate a need for revision.

Alternative 3: Do not approve the Development Agreement. Without the Agreement, liability is exposed to the City in the event of the default of the Developer.

All cost associated with processing the Application are the responsibility of the Developer.

The proposed cost share for uncompleted public improvements previously required of RTC, LLC would be paid for through the Public Improvement Revolving (PIR) Fund.

Staff recommends approval of the Development Agreement, including the cost share agreement not to exceed $37,883.50, based on review of existing City obligations under the context of previous Development Agreements and sureties. The proposed Development Agreement and previous RTC, LLC associated agreements have been reviewed by the City Attorney as well as counsel from Briggs and Morgan that assisted the City develop the previous Master Development Agreement. Staff's recommendation is contingent upon final review by the City Attorney. Due to the timing of submittal of the proposed revisions, the City Attorney has not had an opportunity to complete a final review, but has been discussed in concept.

Note: a significant policy change occurred after publishing of this agenda. The City Council should not feel obligated to make a final decision this evening if it needs more time to digest updated information. Staff did desire to keep this case on the agenda for this evening in the event the City Council is comfortable moving forward based on the information presented at this time. The project has encountered delays as the City worked through the review process, and Staff didn't want to lose the opportunity to avoid further delays if it was not necessary. Project of this scale commencing construction beyond this date begin to encounter reduced project windows due to winter conditions on the final stages of construction.

Motion to adopt Resolution #16-07-131 approving the Development Agreement with D.R. Horton, including the cost share agreement not to exceed $37,883.50 and subject to the review by the City Attorney as to legal form.