Adopt Resolution #23-058 Approving Refund of Earnest Money to COR Trust Bank N.A.

On January 19th, 2024, the City received a letter from COR Trust Bank requesting the City return $10,000 in non-refundable Earnest Money and to reimburse $67,644.31 in additional project expenses incurred by COR Trust Bank, N.A. for the project proposed at the NE Corner of Sunwood Drive and Zeolite Street.  Staff has communicated to COR Trust Bank that Staff is not supportive of reimbursing $67,644.31 in additional project expenses.

The City Ramsey entered into a purchase agreement and subsequent amendments to the purchase agreement to sell land to COR Trust Bank to construct a bank.  On May 25, 2023, the Planning Commission made a recommendation supporting the re-zoning and site plan approval to City Council for the 5,020 bank by COR Trust Bank.   COR Trust Bank provided a Notice to Proceed on July 5, 2023 which made the $10,000 Earnest Money non-refundable.  On July 11th, 2023, the City Council did not approve the site plan as recommended by the Planning Commission, citing various reasons.

The Notice to Proceed was provided to the City after the Planning Commission recommendation to approve the site plan.  Based on the timing of this recommendation, the developer assumed that the project appeared to be moving forward.  However, as mentioned above, the City Council did not approve the site plan and the project is not moving forward.  The Developer looked briefly at other sites but decided that it no longer has an interest in building in Ramsey and has made the request for funds to be returned for the City Council to consider.  Staff supports the request to return the Earnest Money but not the additional project expenses.

None required

Based on the terms of the Purchase Agreement, subsequent amendments to the purchase agreement and the Notice to Proceed provided by COR Trust Bank, N.A., the City has no obligation to return the now "Non-refundable Earnest Money".  However, Staff is generally supportive of returning the $10,000 in Earnest Money based on the timing of the Notice to Proceed following the non-binding Planning Commission recommendation.  Staff is not supportive of returning the $67,644.31 in additional expenses requested by COR Trust Bank. Many projects incur costs in preparation of a site plan that is ultimately not submitted, or the developer decides not to move forward.  There is time and expense that is incurred by both the City and developer during this preliminary sketch plan and site plan process. There is also risk by the developer to provide a Notice to Proceed prior to formal City Council approvals which ultimately made the Earnest Money nonrefundable in this instance.

Based on the information above, Staff believes the developer was acting in good faith by submitting the Notice to Proceed which ultimately made the Earnest Money Non-refundable.  Unfortunately for the developer, the City Council did not accept the Planning Commission recommendation (the Council is not bound by the recommendation by Planning Commission) and the project did not receive necessary approvals to move forward. 

Alternatives include:
1) City Council to return $10,000 in Earnest Money to COR Trust Bank, N.A. (Staff Recommendation)
2) City Council to return $10,000 in Earnest Money and Reimburse $67,644.31 in additional expenses to COR Trust Bank, N.A.
3) No action 
4) Something Else

If the $10,000 Earnest Money is returned the source of funds would be the funds held in Escrow

If the $67,644.31 in additional expenses were to be reimbursed, a funding source would need to be identified by the City Council.

Motion to Adopt Resolution #23-058 Approving Refund of Earnest Money to COR Trust Bank N.A. (Staff/EDA Recommendation)