9.c) Consider Reducing Special Assessments to Lots 3 and 6, Block 1, The Sanctuary Meeting Date: 4/20/2010
Agenda Item: � c�
.
City Council Agenda Report
City of Scandia
14727 209th St. North
Scandia, MN 55073 (651) 433-2274
Action Requested: Consider approving a reduction in the special assessments against
Lots 3 and 6, Block 1, The Sanctuary.
Deadline/ Timeline: N/A
BaCkground: • The Sanctuary is a 58.18-acre, 6-lot subdivision located on
Oxboro Circle, east of Oxboro Avenue. The developer defaulted
on his agreement with the city prior to completion of the last lift of
asphalt on the street serving the development.
• In 2008, the city entered into an agreement with the developer to
allow the city to complete the street improvement and assess the
costs (less the funds available from a financial guarantee) to the
three lots he still owned in the project.
• The City incurred a total cost of$36,841.06 to complete the
project. The City collected $12,375.00 from a letter of credit.
This left$24,466.06 to be assessed, $8,155.35 to each of the three
lots.
• When the assessments were levied, it was discovered that one of
the lots the developer had agreed would be assessed was not, in
fact, owned by the Developer. Thus, in compliance with the intent
of the agreement, the assessments were levied against the
remaining two lots which were owned by the developer, in the
amount of$12,233.03 to each lot to be paid over 5 years at 6.5%
interest.
• Following a foreclosure, the two lots are now owned by the First
State Bank of Wyoming. The bank is now disputing the
assessment. They alleged that the City made the assessment in
error, and that lot assessment should be reduced to $8,155.35 per
lot. (See attached correspondence.) Staff and the City Attorney
responded that the assessments were proper based on the
agreement with the developer.
• The Bank disagrees and has threatened legal action. Litigation
expenses for matters relating to special assessments are excluded
from the city's insurance coverage. Because defense costs could
Page 1 of 2
04/14/10
be significant, staff has recommended that a settlement be
considered.
• The proposed settlement, which the Bank is willing to accept,
would reduce the assessments on each lot by$2,000 and give the
bank credit for the principal and interest paid on the assessment in
2009 as follows:
Original assessment: $24,466.06
Reduction of$2,000 per lot: -4,000.00
Principal and interest paid in 2009: -6,668.22
Payment in satisfaction of assessments: _$13,797.74
Recommendation: I recommend that the Council consider whether or not to approve the
settlement and accept $13,797.74 as payrnent in full for the remaining
balance of the special assessments on Lots 3 and 6, Block 1, The
Sanctuary.
Attachments/ � Petition for Improvement, The Sanctuary(September 2,2008)
Materials provided: � Agreement of Assessment and Waiver of Irregularity and Appeal
(September 2,2008)
• Letter from Thomas Miller,representing First State Bank of Wyoming
(January 20, 2010)
• Letter to Thomas Miller from Administrator Hurlburt(January 28, 2010)
• Letter from Thomas Miller to City Attorney Hebert(February 19,2010)
• Letter to Thomas Miller from City Attorney Hebert(March 23,2010)
• Letter from Thomas Miller to City Attorney Hebert(April 12 2010)
Contact(s): David Hebert, City Attorney
(651 464-3397)
Prepared by: Anne Hurlburt, Administrator
(sanctuary special assessments)
Page 2 of 2
04/14/10
CITY OF SCANDIA
PETITION FOR LOCAL IMPROVEMENT
Scandia, Minnesota September 2,2008
To the City Council of Scandia Minnesota.:
I, the owner of real property abutting on Oxboro Circle in the City of Scandia, described
as follows,to-wit:
Lots 3, 5 and 6, Block 1, The Sanctuary
hereby petition that such street be improved by the installation of the wear course of bituminous
surfacing and the repair of the base course of bituminous surfacing with associated work
pursuant to Minnesota Statutes §429 and that the City assess the entire cost of the improvement
against my described property and I hereby agree to pay the entire cost as apportioned by the
City less the amounts drawn upon from a certain letter of credit dated � 'oZ� G-�
that is pursuant to the developers agreement dated � �% -0�
- �
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AGREEMENT OF ASSESSMENT
AND
WAIVER OF IRREGULARITY AND APPEAL
TffiS AGREEMENT, is made this 2nd day of September, 2008, between the City of
Scandia, State of Minnesota, hereinafter refened to as (the "City") and Brian N. Iverson, 19655
Oxboro Circle, Marine on St. Croix, Minnesota 55047,hereinafter referred to as (the"Owner").
The Owner, being in default of the terms and conditions of that certain Development
Agreement between the parties for the development of The Sanctuary, in consideration of the
action of the City Council, at the Owner's request, to cause the installation of the wear course of
bituminous surfacing on Oxboro Circle and to repair the base course of bituminous surfacing
with associated work and to assess 100%of the cost thereof against Lots 3, 5 and 6, Block 1, The
Sanctuary, Owner agrees to pay the estimated cost thereof, including, but not limited to, all
design, construction, consultant's and attorney's fees and costs in the sum of$42,163.00 with
interest thereon at the rate of 6.5% per annum over a period of five years. Owner further agrees
that the estirnated assessment may be exceeded if the increases are a result of requests made by
the Owner or otherwise approved by the Owner in a subsequent separate written document. The
City agrees that the assessment will be reduced by the amounts received from the fmancial
institution where security has been issued in connection with the Development Agreement to
insure completion of the work. The City does not waive its requirement of the Owner that a11
work be cornpleted on or before September 20, 2008 and this Agreement shall only become
effective if the work is not completed by Owner by said date. Owner expressly waives objection
to any irregularity with regard to the said improvement assessments and any claim that the
amount thereof levied against Owner's property is excessive,together with all rights to appeal in
the courts.
IN TESTIMONY WHEREOF, the parties have hereunto set their hands the day and
year first above written.
'an N. Iverson, Owner
CITY�S�ANDIA ,
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BY: " BY: C=���
D 's D. Seefeldt, Its May r Anne Hurlburt, Clerk/Administrator
MILLER LAW OFFICE, P.A. .
Oak Point Business Center,Suite 6
26357 Forest Boulevard
Thomas F. Miller' P.O. Box 807 J.Vincent Stevens
Tom�MillerLawOffice.com Wyoming, MN 55092 Vince�MillerLawOffice.com
(651)462-0206
Erin E.Wilkerson,Office Manager Fax (651)462-3309
Erin C�MillerLawOffice.com
January 20, 2010 �-- ���=��k�z��;����-----�
;��;� �, � °;s����
Anne Hurlburt, Clerk/Administrator
City of Scandia CITY CF SCAhJDIA
14727 209�' St. N. _�_____-_-__� _
Scandia, MN 55073
RE: First State Bank of Wyoming/Lots 3 and 6, Block l, The Sanctuary
Our File No. 08-188-TFM
Dear Ms. Hurlburt:
I represent the First State Bank of Wyoming (the "Bank"). 'The Bank has foreclosed its
mortgage against the above two lots located within the City of Scandia (the "City").
Accordingly, the Bank is now the owner of these lots (hereinafter the "Bank Lots"). In
reviewing the status of the taxes and assessments against the Bank Lots, I discovered that each of
the two lots has a City assessment against it with an annual payment of$3,334.16. In reviewing
this issue further, I believe this assessment relates to an assessment adopted by the City on
November 18, 2008 (the "2008 Assessment"). My review of certain documents underlying the
2008 Assessrnent establishes that the City approved an assessment in the amount of$24,466.06
against three (3) lots consisting of the two Bank Lots and additionally, Lot 5, Block 1, The
Sanctuary. Assuming this to be correct, $8,155.35 was to be assessed against each of the Bank
Lots which, with interest at the rate of 6.5% and payable over 5 years (starting in 2009) would
result in an annual assessment amount of$1,962.46, significantly less than the$3,334.16 actually
assessed against each of the Bank Lots. Additionally, my investigation shows that no portion of
the 2008 Assessment was assessed against Lot 5.
What appears to have happened is that the 2008 Assessment was levied solely against the two
Bank Lots which does not comply with the underlying Petition, Waiver and Assessment
approvals and which further imposes a significant financial burden on the Bank as the owner of
the two Bank Lots. Also, based on my calculations, the actual 2008 Assessment appears to have
been much higher than the $24,466.06 approved assessment.
On behalf of the Bank, at this time, I request that the City review the 2008 Assessment as to both
of the foregoing issues and if in fact the 2008 Assessment was improperly levied against or only
against the Bank Lots and/or was not limited to the $24,466.06 approved amount, that the City
take immediate action to correct the 2008 Assessment as to its original amount and its
outstanding balance reflecting the significant overpayrnent in 2009. As you know, a
reassessment to correct such mistakes is allowed under Minnesota Statutes Chapter 429.
*also licensed to practice law in the State of Wisconsin
Anne Hurlburt
January 20, 2010
Page 2
If my analysis of the 2008 Assessment and its underlying documents is inaccurate or incomplete,
please provide me with documentation that the 2008 Assessment was properly assessed solely
against the Bank Lots and that the amount of the assessment was duly approved by the City.
If you have any questions or comments please don't hesitate to contact the undersigned.
Very truly yours,
MI�;LER LAW OFFICE, P.A.
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Thomas F. Miller
TFM:sg
cc. Nate Wilner, First State Bank of Wyoming(via e-mail)
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January 28, 2010
Thomas F. Miller
Miller Law Office, P.A.
Oak Point Business Center, Suite 6
26357 Forest Boulevard, PO Box 807
Wyoming, Minnesota 55092
RE: Assessments to Lots in The Sanctuai-y
Your File No. 08-188-TFM
Dear Mr. Miller:
As requested in your letter dated January 20, 2010, we have reviewed the 2008
assessments to Lots 3 and 6, Block ]. The Sanctuary.
The levied assessments were based on an agreement with the Developer to assess the
remainder of the Developer required improvements to the remaining three lots owned by
the Developer in exchange for the City undertaking to complete the work and advance the
necessary funds.
It was later discovered that one of the lots on which the Developer a�reed that the
assessments should be levied was not, in fact, owned by the Developer. Thus, in
compliance with the intent of the agreement, the assessments were levied against the
remaining lots which were owned by the Developer.
Please contact me at 651 433-2274 or by e-mail at a.hurlburt(�a,ci.scandia.mn.us if you
have any questions.
Sincerely,
� L'�%�' �.
L��:���
Anne Hurlburt
City Administrator
cc: David Hebert, City Attorney
14727 2U9'�' St. N , Scandia, Mii3nesota »073
Phonc ((ii 1) �13�-227d Fa� (6�1) -�i;->1 l2 Ilil]J:II1\'�V\1.C1.SC811CI1i1.]1111.LiS
MILLER LAW OFFICE, P.A.
Oak Point Business Center, Suite 6
26357 Forest Boulevard
Thomas F. Miller" P.O. Box 807 J.Vincent Stevens
Tom@Mi1lerLawO�ce.com Wyoming, MN 55092 Vince@MillerLawO�ce.com
(651)462-0206
Erin E.Wilkerson, Office Manager Fax (651)462-3309
Erin@MillerLawO�ce.com
February 19, 2010 VIA E-MAIL
David Hebert, City Attorney
City of Scandia
Hebert & Welch, PA
20 North Lake Street
Forest Lake, MN 55025
RE: Lots 3 and 6, Block 1, The Sanctuary Special Assessments/City of Scandia
Our File No. 08-188-TFM
Dear Dave:
Since you were copied on the January 28, 2010 letter to me from Scandia City Administrator
Anne Hurlburt regarding the above-refere�ced matter, I am providing this response, on behalf of
my client, directly to you. I further presume that you are in receipt of my January 20, 20101etter
to Ms. Hurlburt relating to this matter however, in case you were not provided with a copy of
that letter, I am attaching it for your review.
As I read Ms. Hurlburt response, it became apparent to me that the City of Scandia ("City")
admits that the agreements and approvals with respect to the assessment which was ultimately
levied against my client's two lots was in fact to have been levied against three lots. However,
the City believes that assessing only the two lots was lawful because it was "in compliance with
the intent of the agreement". Because the City's position does not appear to be supported by the
procedural requirements for special assessments as provided in Minnesota Statutes Chapter 429,
because there is no other legal support for ignoring the City's approvals and because assessing
only two rather than three lots will ultimately cost my client a significant amount of money, I
have been authorized to pursue all legal remedies available to my client to seek a reduction in the
assessment or reimbursement of the over-assessment from the City.
Prior to initiating any formal proceeding and incurring the significant cost to do so, which cost
we will certainly seek to assess against the City, I have been authorized to make a final request
that the City reduce the assessment against the Bank lots so that my client will not pay any more
than was identified in the approvals for these assessments. My calculations establish that
roughly $4,000.00 to $5,000.00 should be reduced from the assessment against each of the two
Bank Lots although this can be calculated to the penny once the City agrees to such reduction.
*also licensed to practice law in the State of Wisconsin
David Hebert
February 19, 2010
Page 2
It is my sincere hope that this matter can be resolved amicably and without the significant cost
and risk to either of our clients. Accordingly, could you please let me know the City's position
on this final request and any support for that position as quickly as possible since my client has
accepted an offer to sell one of the two lots and therefore, will be required to pay the assessment
in full at the closing of such sale. Therefore, in order to avoid any claim of waiver, latches or
estoppel, my client will need to commence litigation prior to such closing date.
I thank you in advance for your attention to the matter set forth in this letter.
Very truly yours,
MILLER LAW OFFICE, P.A.
/s/Thomas F. Miller
Thomas F. Miller
TFM:sg
Enclosure
cc. Nathan Wilner, Vice President, First State Bank of Wyoming
HEBERT AND WELCH, P.A.
ATTORNEYS AT LAW
TOWN SQUARE
20 NORTH LAKE STREET, SUITE 301
FOREST LAKE,MN 55025
Phone: (651)464-3397
Faac: (651)464-8664
DAVID K.HEBERT
MICHAEL A.WELCH
March 23, 2010
Mr. T'homas F. Miller
Attorney at Law
P. O. Box 807
Wyoming, MN 55092
Re: The Sanctuary—Special Assessments/City of Scandia
Dear Mr. Miller:
It is our opinion that the assessments in question were properly assessed and are obligations of
your client as a successor in interest to the Developer of The Sanctuary pursuant to the ternls of
the Development Agreement. Your client is responsible for the cost of the improvements
irrespective of whether the costs were assessed against the lots in question.
Additionally, it is our position that the Developer could enter into an assessment agreement with
the City without regard to whether the particular lots were benefited in the amount of the
assessments.
The City Administrator has, nevertheless, agreed to recommend to the City Council the sum of
$20,466.06 in satisfaction of the amounts owing on the lots. The amount represents a reduction
of$2,000.00 in the base assessment for each lot and a waiver of interest owing since the date of
the assessment. We would expect the amount to be paid upon acceptance of the offer.
Please furnish me with your response at your convenience.
Sincerely yours,
HEBERT AND WELCH, P. A.
David K. Hebert
DKH:Ip
Enclosures
cc: Anne Hurlburt
MILLER LAW OFFICE, P.A. •
Oak Point Business Center, Suite 6
26357 Forest Boulevard
Thomas F. Miller" P.O. Box 807 J.Vincent Stevens
Tom@Mi1lerLawOffice.com Wyoming, MN 55092 Vince@MillerLawOffice.com
(651)462-0206
Erin E.Wilkerson,Office Manager Fax (651)462-3309
Erin@MillerLa wOffice,com
April 12, 2010 Via Email
David Hebert
Hebert &Welch, PA
20 North Lake Street, Suite 301
Forest Lake, MN 55025
RE: The Sanctuary/Special Assessments/City of Scandia
Our Client: First State Bank of Wyoming
Our File No. 08-188-TFM
Dear Dave:
I have reviewed and discussed your March 23, 20101etter with my client the, First State Bank of
Wyoming. While neither I nor the Bank agrees with the arguments made in your letter,my
client is willing to accept the offer to pay$20,466.06 in full satisfaction of the amounts owing on
the lots currently owned by the Bank. Your letter indicates that this proposal needs to be
approved by the Scandia City Council and therefore,the Bank's acceptance is of course,
conditioned on approval by the council.
Could you please let me know as soon as the City Council has taken action on the proposal and
also inform me as to how the payment of the amounts owed and release of any further
assessments can best be accomplished? For example, do you envision some form of settlement
ageement to be entered into by our respective client's or simply a payment of the assessment
amount in exchange for a receipt for such payment and a satisfaction/release of all assessments
against the lots?
I look forward to your response at your earliest convenience.
Very truly yours,
MILLER LAW OFFICE, P.A.
/s/Thomas F. Miller
Thomas F. Miller
TFM:eew
cc: Mark Zaruba, Executive Vice-President, First State Bank of Wyoming
Nathan Wilner, Vice President, First State Bank of Wyoming
*also licensed to practice law in the State of Wisconsin