STAFF REPORT

Planning and Zoning Board, September 20, 2010

New Temporary Land Development Ordinance 10-LDO-02 (EN11-019a)

Consideration of a Temporary Land Development Ordinance Amendment Permitting the Town to Issue Building Permits Where Letters of Credit Guaranteeing Installation of Required Public Infrastructure Have Been Disaffirmed by the FDIC

Speaker:  Ms. Laura Cove

From:  Tim Bailey, PE, Director of Engineering
Prepared by:  Laura Cove, PE, Associate Director of Engineering
Approved by:  Benjamin T. Shivar, Town Manager
Approved by:  Michael J. Bajorek, Assistant Town Manager

Executive Summary:  In accordance with land development ordinance (LDO) requirements, the Town has placed a hold on the issuance of new building permits within several areas of the Amberly Development due to the developer’s (Sandler at Amberly, LLC) failure to either complete portions of the necessary public infrastructure such that the Town can accept such infrastructure or provide appropriate financial guarantees assuring the completion of such infrastructure in accordance with the LDO.  At the August 26, 2010 Town Council meeting, council directed staff to draft a temporary ordinance to address this situation for council consideration and a public hearing. A public hearing at Town Council was scheduled for September 16, 2010.  Due to the time sensitive nature of the current situation, comments from the public hearing are not included in the staff report but will be summarized at the Planning and Zoning Board meeting.  A staff recommendation will be presented at the Planning and Zoning Board meeting following the outcome of the public hearing and council’s direction on the draft ordinance.

Tentative Schedule for 10-LDO-02 Amendment:

   *Italicized dates are tentative.

Background:  The Town of Cary land development ordinance permits developers to obtain final plat approval prior to completing all necessary infrastructure if acceptable financial guarantees are provided to assure infrastructure completion. In the case of certain plats in the Amberly PUD, financial guarantees in the form of letters of credit were provided to the Town and were appropriately renewed until late 2009.

After attempts to get the developer to complete work within the Peninsula Development in 2008 and 2009 the Town issued sight draft (claims) against several of the financial guarantees.  Subsequently, the Town received letters from the FDIC indicating that the issuing bank had been placed in receivership and closed. The letters also stated that the Receiver (FDIC) “disaffirms” all of the financial guarantees.  The Town has submitted “proofs of claim” to the FDIC but at this point, the letters of credit have been disaffirmed and the Town does not have any indication that it can collect financially.  Since there are no acceptable financial guarantees in place and because the necessary infrastructure has not been completed, the Town of Cary informed Sandler at Amberly, LLC of its intent to place a hold on the issuance of new building permits within the Peninsula development, as required by the LDO.  The Town’s inability to issue building permits has had an adverse impact on residents who occupy completed homes in the development, on third party builders who purchased lots from Sandler prior to the repudiation of the letters of credit, and to the public.  Several of the third party builders and homeowners approached the Town with information that the builders were ready and able to continue building in Peninsula and desired to find a way to continue to secure building permits under the LDO.

Discussion:  In an effort to address the very specific situation described above, where both the developer and the bank have defaulted in their obligations related to the completion of public infrastructure and where a substantial amount of that infrastructure is installed such that public health and safety does not appear to be an issue, staff has drafted a temporary ordinance which would enable the posting of a substitute financial guarantee apportioned such that it will enable building to recommence and will be available to complete the required public infrastructure.

The ordinance, as currently drafted, includes the following authority:

• To collect a substitute financial guarantee on a per lot basis for building permits for new heated square footage buildings or additions of heated square footage.
• To accept half of the substitute financial guarantee at the time of building permit and half at the time of certificate of occupancy.
• To allow permits for maintenance, repairs and non-heated square footage work to proceed without the collection of a substitute financial guarantee.
• To require specific council action determining the substitute financial guarantee on a per lot basis for each application that meets ordinance requirements.

The ordinance, as currently drafted, does not include the following:

• A guarantee that a building permit will be issued with the offer of the substitute financial guarantee or that a certificate of occupancy will be issued because a building permit was issued upon the acceptance of a substitute financial guarantee.
• A date for the expiration of the temporary ordinance.  Staff plans to continue to evaluate the need for the ordinance and bring back a request to council to terminate the ordinance when appropriate.

Fiscal Impact: 

Implementation of the ordinance should be absorbed by existing staff.  The extent of the fiscal impact will not be known until specific ordinance requirements are implemented.

Staff Recommendation:  A staff recommendation will be presented at the Planning and Zoning Board meeting following the outcome of the public hearing and council’s direction on the draft ordinance.