5.7. SR 04-21-1997~ity of
iver
MEMORANDUM
Item # 5.7.
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City Administrator
April 21, 1997
Derrick Investments
Mr. Roger Derrick came before the City Council on April 7, 1997, to request
that the City Council deviate from its policy of requiring financial security
from developers before they work on projects. The city requires a Letter of
Credit, cash, escrow, or a Disbursement Agreement as financial security for
development projects. This financial security is necessary to protect the city
against the "worse case" scenario whereby part of a project is started and the
developer "disappears" for whatever reason (the developer dies, gets sued,
goes bankrupt, etc.).
Mr. Derrick indicated that he has a contractor available to do work, however
he does not have the bank financing in place until mid May for Phase II of
the project. Making the situation somewhat more complex was the city's
request to install the Highland Avenue water line through this plat and to
have Mr. Derrick provide cover through the grading plan in Phase III for this
water line project. (It should be noted that Mr. Derrick will also be assessed
lateral benefit for this water line and, conversely, will be given water trunk
credit for the line as it goes through Phase I.)
This city water line issue makes the situation somewhat unique and
accordingly we can see some mutual benefit to allowing the grading work to
take place as we are "partners" for this part of the project. For this work, the
city will hold onto the Disbursement Agreement funds and not release monies
as work is completed. Allowing the grading to move forward is contingent
upon the plat being recorded which still has not happened and the grading
plan being formally approved by the city. The Council should note that we
are not partners with the developer as it relates to the installation of sewer
and water, and the city cannot recommend any of the utility work taking
place in Phase II without additional security being placed with the city. Staff
does not know of other forms of security that would be acceptable other than
the financing tools noted above.
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
This request from Mr. Derrick gets to the heart of a city development policy
as it relates to the level of protection that the city wants for development
projects. Currently the city requires 100 percent security for private and
public development projects. This limits the city risk for development
projects. If the city wants to allow Mr. Derrick to install utility pipes without
additional security, then the city needs to thoroughly reevaluate its
development policy and must understand that this deviation will, in effect,
create a new policy that will be available to all developers.
Recommendation
It is recommended that Mr. Derrick be allowed to do grading on Phases II
and III provided that the plat is recorded, the grading plan is approved by the
city engineer, and with the understanding that the city will continue to hold
the Disbursement Agreement funds. It is further recommended that the city
not allow utility pipes to be installed beyond Phase I until additional
financial security is placed with the city.
\\elkriverXsysXshrdocXcouncil\derinvst.doc
ity of
iver
MEMORANDUM
Item # 5.7.
TO:
FROM:
DATE:
SUBJECT:
Mayor & City Council
Pat Klaers, City AdUlator
April 21, 1997
Derrick Investments
Mr. Roger Derrick came before the City Council on April 7, 1997, to request
that the City Council deviate from its policy of requiring financial security
from developers before they work on projects. The city requires a Letter of
Credit, cash, escrow, or a Disbursement Agreement as financial security for
development projects. This financial security is necessary to protect the city
against the "worse case" scenario whereby part of a project is started and the
developer "disappears" for whatever reason (the developer dies, gets sued,
goes bankrupt, etc.).
Mr. Derrick indicated that he has a contractor available to do work, however
he does not have the bank financing in place until mid May for Phase II of
the project. Making the situation somewhat more complex was the city's
request to install the Highland Avenue water line through this plat and to
have Mr. Derrick provide cover through the grading plan in Phase III for this
water line project. (It should be noted that Mr. Derrick will also be assessed
lateral benefit for this water line and, conversely, will be given water trunk
credit for the line as it goes through Phase I.)
This city water line issue makes the situation somewhat unique and
accordingly we can see some mutual benefit to allowing the grading work to
take place as we are "partners" for this part of the project. Allowing the
grading to move forward is contingent upon the plat being recorded which
still has not happened and the grading plan being formally approved by the
city. The Council should note that we are not partners with the developer as
it relates to the installation of sewer and water, and the city cannot
recommend any of the utility work taking place in Phase II without
additional security being placed with the city. Staff does not know of other
forms of security that would be acceptable other than the financing tools
noted above.
13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · (612) 441-7420 · Fax: (612) 441-7425
This request from Mr. Derrick gets to the heart of a city subdivision
ordinance as it relates to the level of protection that the city wants for
development projects. Currently the city requires 100 percent security for
private and public development projects. This limits the city risk for
development projects. If the city wants to allow Mr. Derrick to install utility
pipes without additional security, then the city needs to change its
subdivision ordinance.
Recommendation
It is recommended that Mr. Derrick be allowed to do grading on Phases II
and III provided that the plat is recorded and the grading plan is approved by
the city engineer. It is further recommended that the city not allow utility
pipes to be installed beyond Phase I until additional financial security is
placed with the city.
XXelkriverXsysXshrdocXcouncilXderinvst.doc