5.1.
Public Works Committee
- Meeting Date:
- 05/19/2015
- By:
- Bruce Westby, Engineering/Public Works
Title:
Consider Recommending Council Approval of draft Assessment Agreement for Ridgepoint Residential Development Public Improvements, Improvement Project 15-21
Purpose/Background:
Purpose:
The purpose of this case is to consider recommending Council approval of a draft Assessment Agreement for constructing proposed public improvements for the Ridgepoint seven (7) unit single-family residential development, Improvement Project #15-21.
Background:
As provided in City Code, Village Bank, owner of real property upon which the Ridgepoint seven (7) unit single-family residential development is proposed to be constructed, has requested the City of Ramsey to construct the required public improvements in support of the Ridgepoint development, after which Village Bank will repay the City over a three (3) year term as established in the Assessment Agreement.
The purpose of this case is to consider recommending Council approval of a draft Assessment Agreement for constructing proposed public improvements for the Ridgepoint seven (7) unit single-family residential development, Improvement Project #15-21.
Background:
As provided in City Code, Village Bank, owner of real property upon which the Ridgepoint seven (7) unit single-family residential development is proposed to be constructed, has requested the City of Ramsey to construct the required public improvements in support of the Ridgepoint development, after which Village Bank will repay the City over a three (3) year term as established in the Assessment Agreement.
Timeframe:
Staff estimates this case will take approximately 30 minutes to present and discuss.
Observations/Alternatives:
Observations:
The City’s use of Chapter 429 assessed improvements has been limited in the past decade, with the Legacy Christian Academy project, done about 5 years ago, being the most recent example. This project installed improvements to the Bunker Lake Road and Armstrong interchange area, extended Bunker lake Road to the west, and constructed a connection to Alpine Drive with Puma Street. That was a 429 project of much larger scale and the City issued a G.O. bond to back the project. This process was used more in the past, when it was easier for a developer to get a financial guarantee (e.g., letter of credit) , and the City tax-exempt financing had a bigger interest rate advantage than it does now.
In this case, the Village Bank wishes to develop the property, and the bank claims regulations prohibit the bank from directly using its money to fund development projects. They will be posting 110% government-back securities, pledged to the City, to cover the cost of the project. Consequently, there is virtually no risk to the City. In addition, assessments are still levied against the property. In this current economic environment (i.e., low interest rates, tight credit) it is unlikely a private developer will use this method. The bank is in a unique position because they cannot act as the “developer” per se, and have strong assets that can be pledged to the City as collateral. Private developers are not able to tie-up that much capital in providing the financial guarantees required by the City. A potential benefit to the City is greater control over the development and construction process.
According to the City Attorney, the City is not obligated to approve a request to use assessments as the means for financing improvements.
City code speaks of the subdivider opting to have the City construct improvements, but the City Attorney’s opinion is that such an option is only available if the City allows it. A developer cannot force a City to build streets, sewers, and other public improvements. However, there needs to be a negotiated agreement if the City agrees to do the work and assess the costs. The City ordinances also point out that the City reserves the right to install improvements “as it may elect and upon such terms and conditions as it may deem appropriate under the circumstances.” The bank has the option of selling the parcel to a private party for development, and would likely lose some economic benefit.
Village Bank utilized the engineering consulting firm of Hakanson Anderson to prepare final design plans and specifications for the public improvements. Staff has preliminarily reviewed final plans and specifications as prepared by Hakanson Anderson and finds them to be acceptable for the purposes of constructing the proposed public improvements. Hakanson Anderson also prepared an Engineer’s estimate based on their plans in the amount of $482,222, and with contingencies, the estimated construction cost is $554,555. The final amount reflected in the agreement will be based on actual bid costs, plus a small contingency.
The City will also assess the property owner for City staff time required to administer construction, which includes inspections. This cost will be assessed at 5.5% of project costs. Similarly, construction testing will also be assessed at 2% of construction costs.
Alternatives:
Alternative Action #1 – Motion to recommend Council approval of the draft Assessment Agreement for Ridgepoint residential development public improvements, Improvement Project 15-21 as proposed.
Alternative Action #2 – Motion to recommend Council approval of the draft Assessment Agreement for Ridgepoint residential development public improvements, Improvement Project 15-21 with modifications as follows: ____________________.
Alternative Action #3 – Motion to recommend Council denial of the draft Assessment Agreement.
The City’s use of Chapter 429 assessed improvements has been limited in the past decade, with the Legacy Christian Academy project, done about 5 years ago, being the most recent example. This project installed improvements to the Bunker Lake Road and Armstrong interchange area, extended Bunker lake Road to the west, and constructed a connection to Alpine Drive with Puma Street. That was a 429 project of much larger scale and the City issued a G.O. bond to back the project. This process was used more in the past, when it was easier for a developer to get a financial guarantee (e.g., letter of credit) , and the City tax-exempt financing had a bigger interest rate advantage than it does now.
In this case, the Village Bank wishes to develop the property, and the bank claims regulations prohibit the bank from directly using its money to fund development projects. They will be posting 110% government-back securities, pledged to the City, to cover the cost of the project. Consequently, there is virtually no risk to the City. In addition, assessments are still levied against the property. In this current economic environment (i.e., low interest rates, tight credit) it is unlikely a private developer will use this method. The bank is in a unique position because they cannot act as the “developer” per se, and have strong assets that can be pledged to the City as collateral. Private developers are not able to tie-up that much capital in providing the financial guarantees required by the City. A potential benefit to the City is greater control over the development and construction process.
According to the City Attorney, the City is not obligated to approve a request to use assessments as the means for financing improvements.
City code speaks of the subdivider opting to have the City construct improvements, but the City Attorney’s opinion is that such an option is only available if the City allows it. A developer cannot force a City to build streets, sewers, and other public improvements. However, there needs to be a negotiated agreement if the City agrees to do the work and assess the costs. The City ordinances also point out that the City reserves the right to install improvements “as it may elect and upon such terms and conditions as it may deem appropriate under the circumstances.” The bank has the option of selling the parcel to a private party for development, and would likely lose some economic benefit.
Village Bank utilized the engineering consulting firm of Hakanson Anderson to prepare final design plans and specifications for the public improvements. Staff has preliminarily reviewed final plans and specifications as prepared by Hakanson Anderson and finds them to be acceptable for the purposes of constructing the proposed public improvements. Hakanson Anderson also prepared an Engineer’s estimate based on their plans in the amount of $482,222, and with contingencies, the estimated construction cost is $554,555. The final amount reflected in the agreement will be based on actual bid costs, plus a small contingency.
The City will also assess the property owner for City staff time required to administer construction, which includes inspections. This cost will be assessed at 5.5% of project costs. Similarly, construction testing will also be assessed at 2% of construction costs.
Alternatives:
Alternative Action #1 – Motion to recommend Council approval of the draft Assessment Agreement for Ridgepoint residential development public improvements, Improvement Project 15-21 as proposed.
Alternative Action #2 – Motion to recommend Council approval of the draft Assessment Agreement for Ridgepoint residential development public improvements, Improvement Project 15-21 with modifications as follows: ____________________.
Alternative Action #3 – Motion to recommend Council denial of the draft Assessment Agreement.
Funding Source:
City Improvement Project 15-21 is proposed to be funded from the Public Improvement Revolving (PIR) fund, which would then be paid back over a three (3) year term from special assessments levied against Village Bank via the adopted Assessment Agreement.
Recommendation:
Staff supports any of the three alternative actions.
Action:
Motion to recommend Council approval or denial of the draft Assessment Agreement for Ridgepoint residential development public improvements, Improvement Project 15-21.
Attachments
Form Review
| Inbox | Reviewed By | Date |
|---|---|---|
| Grant Riemer | Grant Riemer | 05/14/2015 03:10 PM |
| Kurt Ulrich | MaryJo Warner | 05/14/2015 03:47 PM |
- Form Started By:
- Bruce Westby
- Started On:
- 05/14/2015 12:35 PM
- Final Approval Date:
- 05/14/2015