ATTACHMENT 2

memorandum

 

TO:

Mayor and Town Council

FROM:

Roger L. Stancil, Town Manager
Ralph D. Karpinos, Town Attorney

subject:

Draft Development Agreement with Ram Development Company

date:

January 29, 2007

PURPOSE

The purpose of this report is to transmit the draft Development Agreement between the Town of Chapel Hill and Ram Development Company to the Town Council and to provide it to the general public two weeks in advance of consideration by the Council on February 12, 2007.

This memorandum will provide a brief summary of the key issues related to the draft Agreement, keyed to the section number of the Agreement.  We plan to provide a full staff report and the Exhibits to the Agreement as part of the Council’s regular packet on February 7, 2007, and to release them to the public on February 8.

BACKGROUND

On December 4, 2006, the Council approved a revised project plan as a basis for negotiating a draft Development Agreement with Ram Development Company, and authorized the Manager and Attorney, in consultation with the Council’s Negotiating Team members, to complete a draft Agreement for consideration by the Town Council.   The Negotiating Team met on January 17, 2007 with the Manager and Attorney to provide advice.

DISCUSSION OF KEY ISSUES

On December 4, the Council discussed a number of items it wished the Negotiating Team to address in the final draft document.  These are reviewed below.

1.  Performance of the Work.  The draft Agreement provides for specific start and end dates (see Article II, Sec. 2.3 and 2.4).  The Scheduled Completion Date is defined in Article I, Defined Terms, as 24 months after the Developer has commenced construction of the project.  There are also performance bond requirements (see Article II, Sec. 2.4 (c) and Sec. 2.19).

The draft Agreement also includes a provision for liquidated damages if the Developer does not achieve substantial completion of the parking garage by the scheduled completion date (see Article II, Sec. 2.15).

2.  Town’s Investment.   The Town will pay an amount not to exceed $7.245 million for 161 public parking spaces on the first level of the underground parking deck upon completion of the project (see Article III).  We propose a borrowing to pay for the spaces that will require the approval of the North Carolina Local Government Commission (Commission).  We have sought advice from the Commission, and have received confirmation that our funding approach is reasonable.

We have learned from the Commission that it will be appropriate to hold the required public hearing and adopt the required resolution near the end of the project, rather than now.  In the draft Agreement, the Developer will notify the Town 60-90 days in advance of the estimated completion date, so that the Town may undertake the required steps to receive Commission approval in a timely manner and be able meet our obligation under the Agreement to purchase the parking facility when it is complete.

3.  Affordable Housing Component.   On December 4, the Council asked for additional consideration of two issues related to the provision of 15% affordable housing in the project in accordance with the Council’s adopted policies.  The Developer proposes 21 one-bedroom units be provided in the project, with a square footage averaging 643 square feet.

a.  Condominium Fees.   In consultation with Orange Community Housing and Land Trust, the Developer and attorneys, the draft Agreement now contains language that the annual affordable housing condominium fees not exceed one and one half percent  (1.5%) of the sales price of the affordable units plus utilities (see Article VIII).  We have based this percentage on an estimated calculation of what a household making less than 80% of the area median income for a one-person household could afford for housing (not more than 30% of gross income for direct housing expenses, including condominium fees)

b.  Parking for Affordable Housing.  On December 4, the Council asked for options for providing parking for the affordable housing units.  The draft Agreement specifies that the parking for the affordable units is the responsibility of the Town (see Article VIII).

We recommend the Council consider the following parking options (please see attached map):

We plan to provide additional discussion, including consideration of what the charges to the residents would be for the use of these spaces, in our more detailed staff report to be distributed.

4.  Public Art.   The draft Agreement has language that there will be developed an Agreement among the artist, the Town, the Developer’s Lender (if required) and the body administering the Town’s Percent for Public Art program (see Article IX).  The Developer shall expend 1% of the total development budget for public art.

5.  LEED Certification.  On December 4, the Council added wording to its resolution authorizing negotiations to encourage LEED silver certification, with a minimum of 20% improvement to energy efficiency.  The draft Agreement includes language that if feasible within the project budget, the project will achieve LEED silver certification, including a 20% improvement in energy efficiency as measured against the standard for energy efficiency established by the American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) (see Article XI).

6.  Termination Rights.  The Council also discussed on December 4 the idea that there should be termination rights which provides for a deadline for starting, after which the deal would end. Please see sections referenced above regarding starting dates and the Developer’s obligations.

CONCLUSION

This draft Agreement is distributed at this time to allow Council and citizens advance time to review the document.  We will provide an additional staff report and analysis for the Council’s February 12, 2007 meeting.

ATTACHMENTS

  1. Draft General Development Agreement between the Town of Chapel Hill and Ram Development Company, January 29, 2007
  2. Map of Potential Affordable Housing Locations