2011-12-14 CC Packet - Laserfiche WebLink

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MEMORANDUM To: Mayor & City Council From: Dallas Larson, City Administrator, and Kurt Glaser, City Attorney Date: December 5, 2011 RE: Clearwater Creek Estates — modification of financial security requirements of development agreement with City Recommendation: Staff recommends granting the Hanzals' request to release some of its financial security as required by their development agreement with the City on the condition of granting the City the right to enforce the terms of the development agreement against new owners of lots in Clearwater Creek Estates. Staff recommends that the Council reduce the Hanzal's financial security in the amount of $34,164.00, and that the Council enter into the attached Agreement. Discussion: Given the effect of the economic downturn on housing construction within the City, it is in the City's best interests to assist Developers where possible. The Hanzals' recent request to modify the financial security requirements of their development agreement is a good example where the City can make reasonable accommodations to help reduce the carrying cost of undeveloped properties. The economy has greatly increased the amount of time undeveloped will remain on the market — and this increases costs to developers. This increased time on the market can also lead to problems for the City. As properties remain vacant or undeveloped, irresponsible developers may not maintain their property. Properties sold by the developer to 'investment' buyers still present the same potential problems to the City once construction finally begins. Accordingly, any change to a developer's financial security requirements cannot increase the financial risk to the City. In the question presented by the Hanzals (where they sold lots to buyers who will hold them for 'investment' instead of immediately building homes) Staff considered several factors before reaching its conclusion that some lower amount of financial security would be appropriate in the Hanzals' case. This conclusion is not universal for all developers who may seek a similar reduction. The principals considered in the Hanzals' case could be used in the future if other developers seek relief from the City. Those principals where: • Of the six lots originally part of this development, four remain undeveloped. • Of the constructed lots, one lot is owned by the developer (Hanzel) while another is a fully constructed 'spec' home currently rented out by the developer. • Three undeveloped lots have been sold to 'investment' buyers / owners. • One undeveloped lot is owned by the developer. • The three investment owners are bona fide buyers who are creditworthy. • Two of the three investment owners purchased lots with a goal of eventually constructing a home for themselves and not another buyer. • The three investment owners are subject to the City's development agreement with the developer. • By entering into the attached Agreement, there is low risk to the City for partial release of developer's security because covenants connected to each lot sold to an investment owner allow the City to enforce the development agreement or Code violations against them and /or the developer. • Keeping some amount of the developer's security gives the City a cash equivalent to draw on if events necessitate enforcement against investment owners. W.