HomeMy WebLinkAboutA083 - Request of First National Bank Pertaining to Eastgate Subdivision - Council Meeting Minutes Vote on Motion: 5-0-1.Voting aye:Betcher,Corrieri,Gartin,Goodman,Orazem. Voting nay:None.
Abstaining due to a conflict of interest: Nelson. Motion,declared carried.
REQUEST OF FIRST NATIONAL BANK PERTAINING TO EASTGATE SUBDIVISION:
Management Analyst Phillips advised that First National Bank owns 12 lots within the Eastgate
Subdivision,which is located near East 131h Street and Dayton Avenue.In 1998,the original Eastgate
developer signed a Development Agreement promising payment for improvements to roads and
utilities in the area. The development was the subject of a bankruptcy proceeding, and in 2001, the
City entered into a Covenant that modified the owner's public infrastructure obligations. The
Covenant was intended to clarify the owner's obligations and more strictly bind the property owner
to pay for improvements earlier than required under the Development Agreement. The property was
ultimately acquired by First National Bank through the bankruptcy proceeding. The Covenant
requires payment to the City for the estimated costs of widening Dayton Avenue for a turn lane and
for connections to water and sewer services. Payment is to be made upon the sale or transfer of each
lot.
Mr. Phillips noted that the water and sewer connection fees have all been paid, and only the road
widening costs remain outstanding.Those costs were revised in 2004 to reflect increased construction
costs. The amount outstanding for the 12 lots remaining in the Subdivision is $94,710.
According to Mr. Phillips, First National Bank has now requested that it be allowed to sell the
properties to its holding company (Ames National Corporation) without being required to pay the
outstanding road assessment.The rationale for the transfer is that federal regulations prohibit national
banks from holding real estate for periods greater than ten years. December 15, 2015, will mark the
ten-year amliversary of First National Bank's acquisition of the properties. City staff previously had
recommended that deferring payment for the road widening costs should be made contingent upon a
revision in the amount owed, since construction costs have increased since the time when the
assessment was last revised.First National Bank has requested that the construction cost not be revised
because this transaction is to a corporation with essentially the same ownership.It further believes that
an increase in the assessment amount will make the lots more difficult to sell for development.
It was reported by Mr. Phillips that the Covenant indicates that the original cost estimate for the road
widening was only binding until May 1, 2001. The City Council revised the construction cost in
November 2004; however, staff believes that the City Council has the option in the future to again
unilaterally revise the construction cost estimate in response to construction cost inflation, and
therefore, adjust the amount owed per lot for the widening of Dayton Road. Assistant City Attorney
Spoden emphasized that the request to transfer the ownership of the property does not preclude
adjustments in the construction cost estimate from being made in the future.
According to Mr. Phillips, modifying the Covenant and Development Agreement will have two
additional effects: (1)It will allow the Development Agreement to be clarified as to what components
remain incomplete and in what manner those components have been superseded by the Covenant,and
(2) It will extend the duration of the Covenant another 21 years from the date of revision. Currently,
the Covenant is only binding until February 2022.
Council Member Goodman asked what would happen if First National Corporation would retain and
development one or more of the lots itself.Assistant City Attorney Spoden said that the Covenant and
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