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exhibited responsive behavior by refunding those that were overcharged and noted that the actual violation period was short and the dollar amounts were minimal. The City's bond counsel, Mary Ippel of Sriggs and Morgan, has reviewed Mr. Jones' February 26, 2009 letter and has prepared a letter a copy of which is attached. In case the City Council has questions, Ms. Ippel will be in attendance at the City Council meeting to discuss the issue. Regardless of how the statutes and regulations are interpreted, it is clear that there was a violation of the affordability guidelines for a period of time in 2008 Staff has reviewed the rent information from the time the bonds were issued (June 2007) to present. Staff's analysis (which does not factor in the Section 8 interpretation) has determined that the only time the project was not in compliance were the months of July, August, September, October, and November of 2008. In staff's review of the matter, we have not found any deliberate attempt to charge tenants more than was allowed. Sased on the communication dated October 31, 2008 from Norm Jones, the attorney for the developer, it is stated that the developer relied on a faulty interpretation on what was included in "gross rent" . Staff did find that several mistakes occurred when the developer tried to apply the regulations and in calculating the correct rent. These mistakes appear to be more due to the lack of experience with specific affordable housing regulations than any malicious intent. However, these mistakes do cause concern for staff and leaves staff concerned that these problems could recur if proper oversight and care is not applied to the property management. Staff also found very poor communication between the developer and the tenants as well as between the developer's team members in regards the proper rent that should be charged. STAFF RECOMMENDATION Staff recommends that a letter of non-compliance be issued to the developer but that no penalty be levied. Specifically, the letter should state that Centennial Gardens was in non-compliance with the affordability regulations for the months of July, August, September, October and November 2008 but that the violations that occurred have been deemed "insubstantial" and no penalty will be levied at this time. The non-compliance letter should further state that violations were a result of a misinterpretation of regulations and poor communication. Finally, the letter should clearly state that if this or a similar violation occurs again, the City will levy a penalty. REQUESTED COUNCIL ACTION Motion to authorize staff to send a non-compliance letter to Gardens East Limited Partnership in regards to the Centennial Commons apartment development. Prepared by: Patrick Trudgeon, Community Development Director (651) 792-7071 Attachments: A: 2008 Minnesota Statutes Section 474A.047 Residential Rental Bonds; Limitations B: Letter from Jack Cann, Housing Preservation Project dated October 24, 2008 C: Letter from Norm Jones , Attorney for Gardens East Limited Partnership, dated October 31, 2008 D: Letter from Jack Cann, Housing Preservation Project dated November 26, 2008 E: Letter from Norm Jones, Attorney for Gardens East Limited Partnership, dated February 26, 2009 F: Letter from Mary Ippel, City Bond Counsel, dated March 4, 2009. Page 3 of 3