HomeMy WebLinkAboutA019 - Council Action Form dated April 22, 2008 ITEM # 41
DATE 04-22-08
COUNCIL ACTION FORM
SUBJECT: WESSEX SUBDIVISION LETTER OF CREDIT FOR OAKWOOD ROAD
IMPROVEMENTS
BACKGROUND:
The City staff was approached recently by Dean Hunziker and Chuck Winkleblack
representing the developers of the Wessex Subdivision. The Development Agreement
for this subdivision specifies that the developers are responsible for the costs of
widening Oakwood Road to three lanes along the frontage of the subdivision. According
to the agreement, the responsibility to complete these street improvements is to be
secured with cash placed in escrow by the developers.
The developers have emphasized that in accordance with this obligation, a significant
amount of cash has been placed in an account at a very low interest rate. In addition,
because it must be readily available to the City if, and when, the widening of Oakwood
is required, these funds are not available to the developers to accomplish other projects
in the City.
The developers have requested that the City consider accepting a letter of credit
as an alternative to satisfying the financial security requirement for street
improvements specified in the Wessex Subdivision Development Agreement.
The letter of credit will adequately secure the developer's obligation to fund the street
widening project. The letter of credit will automatically renew annually until the project
has been completed or the City is given written notice of the intent to close the letter, at
which time the City may present the letter for cash.
ALTERNATIVES:
1. Authorize a letter of credit from the developers of Wessex Subdivision in the
amount of $60,000 as financial security 0r file iciure st1"eel fi�proveme IUD
specified in the Development Agreement. This letter of credit must be in a form
acceptable to the City staff that will include an automatic renewal provision until
the street improvements are made.
2. Retain the current obligation that the developers of the Wessex Subdivision be
required to maintain a cash escrow as the security for the future street
improvements specified in the Development Agreement.
MANAGER'S RECOMMENDED ACTION:
Each development situation is unique and, therefore, must be judged individually. In
this particular case, the need to widen Oakwood Road has not progressed as fast as
originally expected. Therefore, this street project is not currently programmed in the five-
year Capital Improvement Plan. The timing of these improvements will be based upon
the level of continued development in the area. Thus, it could be argued that in this case
a letter of credit is a more fair approach to secure the developers' obligation given the
uncertainty of the timing for the street improvement project.
Therefore, it is the recommendation of the City Manager that the City Council
adopt Alternative No. 1, thereby authorizing the attached letter of credit in the
amount of $60,000 as financial security for the future widening of Oakwood Road
in association with Wessex Subdivision. Support for this alternative was conditioned
on the fact that an acceptable letter of credit was received that reflects the following
language:
"The expiration date of this Letter of Credit is (Date). It is a condition of this Letter of
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Credit ii2Llt it YVlli be a'litoiP ZtI l� er cam.. �u �VZihG�. GT,�2,1 l?Z C;23 yet-Zncre�^ZeZ s
until one of the following occurs: (a) 60 days prior to the then expiration date, we notify
Beneficiary at the above address of our election not to extend this Letter of Credit for an
additional one-year period; or, (b) a deposit for an equivalent amount is made with the
City of Ames. Upon receipt of the 60-day notice, the Beneficiary may draw on this Letter
of Credit. "
r
Sr FIRST
NATIONAL
BANK
AMES •ANKENY
Issue Date: April 15, 2008
IRREVOCABLE LETTER OF CREDIT# 0364
BENEFICIARY:
City of Ames
C/o City Clerk
515 Clark Avenue
Ames, IA 50010
RE: Wessex Subdivision
We hereby authorize you to draw on First National Bank, Ames, Iowa, for account of Wessex,
L.L.C., up to the aggregate amount of$60,000.00 available by your draft on sight at First
National Bank,Ames, Iowa,to be accompanied by:
1) Copies of all invoices, which have remained unpaid for 60 days from invoice date
2) Beneficiary's signed statement indicating that the invoices are unpaid
3) Copy of this Irrevocable Letter of Credit No. 0364
Partial payments are permitted.
We hereby agree that drafts drawn under and in compliance with the terms of this Letter of Credit
will be duly honored. -
The expiration of this Letter of Credit is April 15, 2009. It is a condition of this Letter of Credit
that it will be automatically extended without amendment in one-year increments until one of the
following occurs: (a) 60 days prior to the then expiration date,we notify Beneficiary at the above
address of our election not to extend this Letter of Credit for an additional one-year period; or, (b)
a deposit for an equivalent amount is made with the City of Ames. Upon receipt of the 60-day
notice, the Beneficiary may draw on this Letter of Credit.
This Letter of Credit is subject to the Uniform Customs and Practices for Documentary Credit
(1993)Revision, International Chamber of Commerce Publications No. 500, or current revision
in place.
Sincerely,
Scott T. Bauer
President
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LENO M