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if the issuer issues an order of noncompliance. For each additional _year a project is out of <br />compliance, the annual penalty must be increased by one-half of one percent of the total amount <br />of bonds issued under this chapter for the project. The issuer may waive insubstantial <br />violations. <br />The statutes are very clear that the penalty is a fixed amount. In Centennial Gardens case, the penalty <br />would be $60,000 if the City finds the development out of non-compliance. In talking to City bond <br />counsel, the statutes do not allow the issuer (the City) to levy a lesser or greater penalty. <br />The developer has acknowledged that they miscalculated the rents when applying the 20% affordable <br />standard but that it was an oversight and not intentional and have since lowered the rent and refunded <br />the overpayments to those that were overcharged. <br />Staff is in the process of collecting the information regarding the rents that were charged and when they <br />were charged. At this point, staff is not ready to make a recommendation to the City Council in regards <br />to a penalty and plan on bringing the whole matter to the March 9, 2009 City Council meeting. <br />REQUESTED COUNCIL ACTION <br />No action necessary, report provided for information purposes. <br />Prepared by: Patrick Trudgeon, Community Development Director (651) 792-7071 <br />Attachments: A: 2008 Minnesota Statutes Section 474A.047 Residential Rental Bonds; Limitations <br />B: Letter from Jack Cann, Housing Preservation Project dated October 24, 2008 <br />C: Letter from Norm Jones , Attorney for Gardens East Limited Partnership, dated October 31, 2008 <br />D: Letter from Jack Cann, Housing Preservation Project dated November 26, 2008 <br />Page 2 of 2 <br />