Loading...
HomeMy WebLinkAboutA018 - Letter from City Attorney dated June 18, 1987 AMES O I TY O F AX M E S i owA 50010 ALL-AMERICA CITY �. FILED 1982-1983 June 18, 1987 JUN 181987 CITY CLERK CITY OF AMES,IOWA Honorable F. Paul Goodland, Mayor and Members of the City Council of the City of Ames, Iowa In re: Green Hills, Proposed Performance Bond in Lieu of Mortgage to Secure Tax Increment Dear Mayor Goodland and Council Members: The principals on the agreement for construction of Green Hills Road have proposed that the city accept the attached performance bond in lieu of the mortgage promised by paragraph 7 of the agreement as security for the tax increment payment promised by paragraph 5 of the agreement. (See attached p. 2 of the agreement) This is reasonable security given the apparent success of the project and will serve the city's interest as well as, if not better than the promised mortgage. Granting the promised mortgage will cause financing difficulties for the project developers which the city can obviate by agreeing to accept the tendered bond in lieu of the mortgage. Attached is a March, 1987 letter of Harry Strate in which the use of the performance bond in lieu of the mortgage is broached to all concerned, with his reasons for proposing it. It is my advice that the city accept the bond as tendered. The alterna- tive is to cause unnecessary problems for the continued development of Green Hills with no apparent benefit to the city. Respectfully submitted, John R. Klaus City Attorney JRK/bh Enclosures 3 cc: Harry Strate Steve Zumbach R. Johnson units , as shown by the Appendix, shall be completed not later than eighteen (18) months from the issuance of a building permit for any part thereof. 5. When seven (7) full fiscal years have passed from the date that co nstruction of the street is finally accepted by the City of Ames, the -Developer and the Contract Holder shall be jointly and severably obligated to pay, and shall pay to the City the amount of money by which the actual cost to the City of designing, constructing and financing said street (including interest at the average state set city depository rates and financing fees paid on any money borrowed or transferred to the general fund for financing said street plus the cost of the City's in- house engineering services) exceeds the sum of the amount of the difference each year between the real estate property tax receipts paid to the Citv (exclusive of a,py such receipts to the School District, County or Area Community Col.leke) from taxation of Lot 1 of the Gateway Center Subdivision in the year before construction of the street was begun, and the amount of such tax receipts pertaining to said land due and payable to the City of Ames in years one through seven inclusive following construction of the roadway. The Developer may, at the Developer's sole discretion, prepay in any year prior to the seventh year the then calculable difference between costs to the City described above including interest to come due on .municipal bonds, and the proper- ty tax payments also described above. if the Developer makes such payment, then the City agrees to immediately release the mortgage l ranted inparagraph 7. This g payment and release will satisfy allfinancial obligations otherwise provided in this paragraph. 6. The City shall keep all contracts, change orders, invoices, payroll time sheets, memoranda , and other accountingdocuments needed to j document and substantiate the City' s claim as to the actual cost of designing, constructing and financing the street for a period of at least ten vears following completion and acceptance of said street. Photocopies of all such documents shall be provided to the Developer on r request for its inspection and audit. Any and all attorney expense or litigation cost pertaining to resolution of disputes under paragraph 5 above shall be paid by the Developer. For attorney or litigation expense pertaining to enforcement or resolution of conflicts under other parts of this agreement each party shall bear whatever expense they incur. 7. Not later than the date Developer gives the City the notice to proceed pursuant to paragraph 3 above, the Developer and Contract }folder shall grant to the City a valid and effective first lien mortgage of the premises shown and described in the Appendix as the Land Designated for Health Care Facility, such mortgage to secure the obligation of para- graph 5 above,b p e, provided however that said mort , e sh,rll be partially g g p ] 1� and temporarily released for a period not to exceed two years to permit the securing of temporary construction financing by Developer, by instruments of debt having a term not greater than two years, for con- struction of the said health care facility building and other improve- ments having a market value, wlien completed, of not less than five hundred thousand dollars on said mortgage ]and. A1 ] documents ncnis I er - taining to provisions of this paragraph shall be reviewed by the City' s attorney for form and legality. 8. The Developer and Contract Holder may with the approval of the Ames City Council, (such approval shall not be unreasonably withheld) assign their duties , responsibilities, or rights under this agreement but if the Developer abandons the project, ("abandon" being defined as failure to responsibly provide for ownership, operation, or construction 'r of the retirement community on the part of the Developer) , then in the event the street is completed and usable the Developer and Contract Holder shall be immediately liable jointly and severably to the City for h payment of the entire cost of designing, constructing, g, and financing the aforesaid street, less already paid property tax benefits accrued as part of paragraph. five. 2 BOOK __QQ__1- PAGE �. MAR 2 0 :1987 GREEN HILLS Q Company of Ames,Inc. March 18, 1987 Mr. Fred Lock Senior Vice President United Federal Savings Bank of Iowa r � Fourth at Locust Des Moines, IA 50309 Dear Fred: The City of Ames has asked us to write to you to highlight their rights under an "Agreement for the Construction of the Green Hills Road"entered into among the City, the Green Hills Company, and the Iowa State University Achievement Fund. This agreement was recorded February 25; 1985 in Book 215 at Page 334 in the Story County Recorder's office. In brief, the agreement provides for the construction of a private road by the City for the benefit of the Green Hills Community, and for reimbursement through property tax receipts and granting of a security interest in Lot 6 to assure performance. The construction financing debt from United Federal Savings Bank of Iowa, secured by mortgages on Lots 1 and 6, is to be paid in full by June 30, 1987. ' According to our agreement with the City, they would assert the priority of their lien on July 11, 1987. By this time, of course; our agreement would be fulfilled. Nevertheless, to assuage the concerns of the City Attorney, we wish to remind all of the parties to our agreement of the rights of the City of Ames under the agreement. It would also be important to point out that because we are aggressively pursuing construction of Phase II of the Health Care Center, we are going to request that the City accept as security for our repayment, a Performance Bond in lieu of a lien on the Care Center and Lot 6. This would require a presentation to the City Council in order to obtain approval of a modification in the agreement. The advantage to us would be obvious in that it would simplify our construction financing task. The advantage to the City would be the more desirable prospect of cash payment under a bond rather than foreclosure on a nursing home. Clearly, the improve- ments have been made and increased property taxes are being paid so the actual monetary risk to the City is small under any course. I believe the City will accept our offer. 125 South Third, P.O.Box 767,Ames,Iowa 50010(515)233-1227 Page 2 1 Mr. Fred Lack .� March 18, 1987 If you have any questions regarding this issue, please contact Duane W. Sandage or me. Hope to see you soon. Sincer y, y E. Strate S/me cc: John Klaus - City Attorney Steve Schainker - City Manager Paul Goodland - Mayor Richard Lozier Green Hills Directors Warren Madden Wayne Moore Robert Krotz SURETY BOND BOND NO. IA 509075 KNOW ALL MEN BY THESE PRESENTS, that we, Green. Hills Company of Ames, Inc. and the Iowa State University Achievement Fund, jointly as princi- pal , of the County of Story and State of Iowa, and Merchants Bonding Company (Mutual) of the County of "Polk and State of Iowa, as Surety are held and firmly bound unto the City of Ames, Iowa in the sum of Two Hundred Eighty-One Thousand Two Hundred Seventy Dollars ($281,270.00, good and lawful money of the United States of America, to be paid to the said City of Ames for the payment whereof said principal and Surety bind themselves firmly by these presents. WHEREAS, Green Hills Company of Ames, Inc. and the City of Ames has entered into an agreement dated April 24, 1984 entitled "Agreement for Construction of the Green Hills Road, Gateway Center Subdivision, Ames, Iowa." Paragraph 7 of the Agreement calls for the granting to the city a first mortgage lien on Lot 6 of the subdivision to secure repayment of the City of Ames for certain street improvements. As such a lien would seriously disrupt the ability of Green Hills to construct subsequent phases in the Health Center, the substitution of this performance bond for the first lien mortgage is acceptable. NOW THEREFORE, the conditions of this obligation is such, that in the event that the increased property taxes paid as a result of construction of the improvements on Lot 1 of Gateway Center Subdivision, pay back in full the cost of the construction of Green Hills Drive, then this obligation to be void; otherwise to remain in full force and effect until 5:0O p.m. December 31, 1993. Demand must be made. by the City of Ames, by certified mail , upon both the principal and surety within 90 days of the expiration date of this bond. Signed this inth day of Jimp GREEN HILLS COMPANY OF AMES, INC. MERCH BOND G 0 ANY (MUTUAL) Principal T uret John Bed rz, As "stant Vice Pres. IOWA STATE UNIVERSITY ACHIEVEMENT FUND Principal