07-14-2009 Council Work Session Packet

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r r MEMORANDUM To: Mayor& City Council Bill Wells, City Administrator From: Mike Gaffron, Asst. City Admin. - Long Term Strategy Date: July 14, 2009 Subject: Stonebay Lofts Letter of Credit At the recommendation of the City Attorney and City Engineer, the Letter of Credit (LOC) for the Stonebay Lofts condominium building has been drawn in its entire amount of$45, 750. The cash is now in the City accounts. The reasons for this withdrawal are documented in the attached email. Additionally, the developer is being sued by Mainstreet Bank whose loans to Zachman are in default, and staff concluded that since the LOC was set to expire on July 15, we would be best served by having the cash in hand rather than requesting another extension. At this juncture I do not have any intent to start completing the work that remains to be done; rather, I would propose for the time being that we meet with Zachman and suggest that he arrange for completion of the work, and we will pay his bills from the proceeds. Note also that the unpaid utility billings and unpaid pass-through engineering costs attributed to the Lofts are approaching $15,000 (a portion of these engineering billings may be attributable to the Stonebay project in general and not just the Lofts project). Soren has indicated there may be justification to use LOC proceeds to pay those bills. To our knowledge, only two of the 57 Lofts units have been sold to date.