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TO: Mayor and City Council
FROM: Public Works Department
Law Department
DATE: March 4, 2021
SUBJECT:
The obligation of the developer of Butterfield Phase II, Unit 4B - Lot 401 ("Lot 401") to construct a 100' extension of Sunrise Rd as a condition of the City's final acceptance of required public improvements.
PURPOSE:
To provide an alternative means to secure the developer's obligation to construct a 100' extension of Sunrise Dr. in place of a letter of credit.
BACKGROUND:
As part of the City's approval process for the development of Lot 401, the developer dedicated right of way and committed to construct a 100' extension ("the Extension") of Sunrise Rd along its southern properly line from Frieder Lane to its eastern property line. While Sunrise Rd does not presently connect to Lot 401, the future development of the parcels to the east of Lot 401 may require the developers of those parcels to construct Sunrise Rd from the Lot 401 lot line east to Meridian Road. Many of these parcels are not annexed to the City of Aurora, but could be annexed in the future under the City's boundary line agreement with the City of Naperville. It is possible that these parcels will not be annexed and developed for the foreseeable future. It is also possible that the parcels may be combined with each other and developed in a manner that precludes the construction of Sunrise Rd along its proposed alignment. If Sunrise Rd. is not constructed, the 100' Extension will essentially be useless to the City.
Because of what it views as the speculative nature of the development of the neighboring properties, and the possibility that a development might not require the construction of Sunrise Rd. at all, the developer did not construct the extension as required by the City. Instead, it posted an $80,210 letter of credit to secure the eventual construction of the extension. Because Sunrise Rd constitutes an above ground improvement, the City did not accept the site's above ground approvements which include the completed Frieder Lane in late November 2020 when it accepted the underground improvements. As a result, the developer has both the letter of credit for Sunrise's construction as well as the letter of credit for all public improvements in the amount of $2,310,708 in effect and the larger letter was not reduced to the 20% maintenance level in spite of the fact all these public improvements have been inspected and meet the City's requirements.
Since last fall, the developer has urged the City to allow it to close out its letter of credit with respect to Sunrise Rd and reduce its security for public improvements to 20%. In addition to carrying costs, the developer has reported that its bank wants to close out the project and will not continue to extend the smaller letter of credit beyond this year. For legitimate reasons, maintaining even the $80,210 line of credit indefinitely is not a viable option.
City Staff, for its part, understands the inefficiency of requiring the developer to build a possible "road to nowhere," but does not wish to put the City in the position of having to build the extension at its own expense if future developments require the construction of Sunrise Road from Meridian Dr. to Lot 401. It also recognizes that the developer made its own decision to post the letter of credit instead of constructing the extension while construction was occurring at the site. At the same time, if construction had proceeded per plan, the City would now be responsible for maintaining 100' of a public road that it has no present use and likely would deteriorate over time.
Since the fall, staff have exchanged ideas with the developer's counsel to attempt to come to an agreement that provides adequate security to assure the construction of the extension at the developer's expense but may be less cumbersome than the letter of credit process.
The developer is planning on selling Lot 401 in the near future and through counsel has urged a compromise.
DISCUSSION:
The Developer initially proposed to execute and record a restrictive covenant against Lot 401 in favor of the City obligating the owner of Lot 401 to pay for the construction of the 100' extension at such time that the remainder of Sunrise Rd is built. Upon the recording of the covenant, the City would have immediately released the $80,210 letter of credit and accepted all remaining above ground public improvements. This concept was presented to the I&T Committee on March 22, 2021 and earned the committee's unanimous support.
Unfortunately, very shortly after the I&T Committee made its recommendation, a potential purchaser of the property informed the Developer that it would not purchase a property subject to the restrictive covenant, despite the conditional obligation being quite small in relation to the value of the property.
City Staff and the Developer continued their negotiations and arrived the following proposal for consideration by the Council.
The Developer will deposit $80,000 with the City to be held in a deferred revenue account. Upon receipt of these funds, the City Engineer will accept all other above-ground public improvements at Lot 401 and authorize the release of the letter of credit securing the Developer's obligation to construct the Sunrise Rd. Extension. The City would hold these funds until such time as development to the east of Lot 401 required the construction of Sunrise Rd. and would use the funds to pay the cost (or reimburse a developer) for construction of the extension. If the City (or DuPage County) approves plans for the lots to the east of Lot 401 that preclude the construction of Sunrise Rd that eliminates the need for the extension, the City would return the funds to the Developer.
IMPACT STATEMENT:
Approval of this Ordinance will expedite the close out of the City's involvement with the development of Lot 401, protect its interests in the event Sunrise Rd. is constructed, and potentially accelerate the use of Lot 401 for tax generating purposes.
RECOMMENDATIONS:
That the Council approve this Ordinance
cc: Infrastructure and Technology Committee
CITY OF AURORA, ILLINOIS
ORDINANCE NO. _________
DATE OF PASSAGE ________________
title
An Ordinance accepting the deposit of $80,000 in lieu of the immediate construction of certain required public improvements for Butterfield Phase II, Unit 4B - Lot 401 - 2350 Frieder Ln and authorizing the acceptance of other above ground improvements thereupon.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, in September 2017, the City approved the final plat and the final plan for the real property commonly known as Butterfield Phase II, Unit 4B - Lot 401 ("Lot 401") located 2350 Frieder Ln; and
WHEREAS, pursuant to the approved final plat and final plan for Lot 401, its dedicated a 100' right of way in favor of the City from Frieder Lane to the east property line of Lot 401 and agreed to construct, thereupon, roadway to be dedicated to the City for the extension of Sunrise Road ("the Extension"); and
WHEREAS, the final plat and final plan contemplated that the Extension would connect to over a dedicated right of way for Sunrise Road and the partially paved Sunrise Road (which is currently a township road) extending east from Lot 401 to Meridian Road; and
WHEREAS, no plans presently exist for the development of any of the properties to the east of Lot 401 that would require construction of the Extension; and
WHEREAS, the owner of Lot 401 has requested to defer its obligation to construct the Extension until or unless development of any real property to its east requires the construction of Sunrise Rd.; and
WHEREAS, in lieu of the development security currently held by the City to guarantee the construction of the Extension, the owner of Lot 401 has agreed to deposit with the City $80,000 ("Alternative Construction Security") to be used for the exclusive purpose of constructing or paying the cost of constructing the Extension at such time as any development to its east requires the construction of Sunrise Rd. necessitating the construction of the Extension; and
WHEREAS, the construction of the Extension remains the only outstanding barrier to the City's acceptance of the above ground improvements required by the final plat and final plan for Lot 401; and
WHEREAS, the City previously accepted the below ground improvements required by the final plat and final plan for Lot 401 on November 24, 2020; and
WHEREAS, the Engineering Division of the Public Works Department has inspected all required above ground improvements, with the exception of the Extension, during construction and found them to be in substantial conformance with the approved plans; and
WHEREAS, but for the construction of the Extension, the Owner had completed all other public improvements required by the final plat and final plan for Lot 401 as of November 24, 2020, so as to warrant the establishment of a 20% one-year maintenance security effective as of that date and a release of any remaining construction securities upon the City's receipt of the Alternative Construction Security.
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Aurora, Illinois, as follows: that upon the City's receipt of the Alternative Construction Security, the City Engineer is authorized to release the letter of credit securing the Owner's obligation to construct the Extension; and further
BE IT ORDAINED, that the City's receipt of the Alternative Construction Security shall deem the construction of the Extension to be complete for the limited purpose of the City's acceptance of the above ground public improvements on Lot 401, consistent with the final plat and final plan for Lot 401; and further
BE IT ORDAINED, that the City Treasurer shall be and hereby is authorized and directed to deposit the Alternative Construction Security into a deferred revenue account and shall ensure such funds are used only for the purposes contemplated by this Ordinance and no other; and further
BE IT ORDAINED, that should construction commence upon the lots to the east of 401 pursuant to plans adopted by the City or the County of DuPage that precludes the construction of Sunrise Rd so as to make the construction of the Extension unnecessary, the City Treasurer, upon the direction of the City Engineer shall be and hereby is authorized and directed to return the Alternative Construction Security to the Developer forthwith; and further
BE IT ORDAINED, that the City Engineer is authorized to execute on behalf of the City any letter or memoranda with the Developer or the Developer's legal representative memorializing the agreement authorized by this Ordinance; and further
that the City Engineer is authorized to accept on behalf of the City all above-ground improvements required by the approved final plan for the development of Lot 401; and further
BE IT ORDAINED, that the one-year maintenance period for the above-ground improvements at Lot 401 shall be computed from November 24, 2020, (the approval date of Resolution R20-269, accepting all below-ground improvements at Lot 401); and further
BE IT ORDAINED, that the provisions of this Ordinance shall supersede all prior conflicting ordinances or resolutions previously adopted by the City Council.