The URL can be used to link to this page

Home My WebLink AboutITEM II-C-1vu; lU~ ~uui rJ7. L:J 4LJ4J.30LL~4 UKUtIV 5111-'I-ItN5KLlNlat f-';:;(a~ {1 ;j GS ST~lEPHENS KL~NGE ~L~ e T 7 r1 v ai r v c n r . w ..r IOH2~7 M. OROEN RICHARD M- STHFH5N9 CHARLES A. P^+,ptdK SnMU2L A. AODAHOUGH BRIAN D, AMSDARY 'iFLEP1iONE (425) 4y3~6206 PACyfMR,F. (425) 453-6224 11100 N.F. BTH STREET, Si717"E 750 BELLEVLJE, WASHINGTON 93004 ~: ~ ~ ,. ,r;, , ~ , r •. ~~ -. k',F1,CSI~MILE `°~ `~ ~ . ,,, August 10, 2007 f~ ~ ' ~ t,~~ TO: Auburn City Council, City of Auburn TA,X NUMBER: (253) $04-3116 FROM; Charles A. Klinge, Samuel A. Rodabough SUBJECT: City of Auburn. Payback Agrcemexlt No. l 02 W. H. Hughes, Jr. Co., Irlc. TOTAL NUMBER O)F 1P,~1.GES INCLUDII~IG COVER: . 'l Original sent via U.S. Mail ®'Yes ^ No PLEASE NOTIFY US IMMEDIA"I'TLY TF YOU DO NOT RECEIVE ENTIRE TRANSMTSSTON. TI-I1; INFORMATION CONTAINED IN THIS F'AX .MAY KE PRIVILEGED ANA/OR CONFIDENTIAL INI+ORMATION INTENDED ONLY FOR THE C7SE OF THE INDIVIDUAL OR TNTTTY~ NAMED. Ii' THE. READER OF' THIS MESSAGE IS NOT THE TNTENDEb .RECIPIENT, YOU ARE HDREPY NOTTFiED 'I'I•iAT ANX DTSSF,MiNATTON, DTSTRIITUTION, OR COPYING OF 7kII5 FA.X iS STRICTLY' PROHIBITED. 1F YOC1 HAVE RECEIVED THiS FAX IN ERROR, PI.,F,ASE NOTT.FY US I3Y PHONE AND RETURN THE ORIGINAL MESSAGE TO US VIA U-S. POSTAL SERVICE. TI~IANK YOU. b~;' lb! 1bb . by: 'L5 4'L5453b'L'14 UKUtN 51 tl-'H1=N51<L1NGl= N~GE Fi'g' G•S G~OEN STE~'~ENS~KLINGE LLP ATTORNEYS A, '1' yAW 11100 N.E. 8'I'~-1 STREfiT, SUITE 750 BELLEViJE, WA,SH,II~iGTON 98004 Via Facsimile aid U.S. Mail Auburn City Council. City of Auburn 25 West Maui, Street Auburn, WA 98001-4998 August. 10, 2007 ll~e: City of A.ubux•~n PaybacDc Agreement l~®. 102 ~V. H. T-~ughes, .Tr. Co., Inc. Dear CouliciI Members: 'TF1LPtiON= (425) 453-b2O6 f.4C5IMQ= (425) 453-G~?4 >:•; ~-° ~; `~ti This firm. represents Bill Hughes, Auburn Place Horncs LLC, and W.H. Hughes, Jr, Coz-l~pany lne., witb. respect to Payback .A.greelCr>ent No. 102 ("Agreement") (atta.ched as Appendix ~) for the sewer line extension along 112th Avenue Si/. Mr. F~ugl,es expended approxinziately $471.,093 to construct this utility exte~]sion with the expectation that he would receive a. payback agreement. t1 payback agreemnnt is necessary to compensate Mr. Hughes foz~ the t,enefit that he has conferred on adjoining properties and the City. Please accept the attached proposed Agreement for the Council's consideration,. Bac~xound The proposed Agreement stems from Ivlr. kluglaes' extension in 2005 of approximiitely 830 lirl.ear. feet ofoff--site saxlitary sewez• and sewer stabs to intervening parcels as a condition of approval for Auburn Place, a residential subdivision consisting of 1.4 parcels. As previously indicated, the extension of these utilities benefited numerous other properties, primarily those tivith frontage on 1.12th Avemle SE. As is customary with ar~y extension. of public utilities, Mr. Hughes executed a Developer Public Fa.ci.lity Extensiozl Agreezxnezlt with the City. Although that Agreement states that °`~t]he City may enter into a Payback Agreement, if applicable, with the Developer. pursuant t.a the requirements of ~C`W 35.91," it was rrly client's understanding that the City would execute such a payback agreementt. T,zaasmuch as payback agreements are comrrlorlplace, Mr. Hughes ha.d r~o reason to doubt that a pa.yba.ck agreezx~ent would be executed. After colrzpletiorz of the project, Mr.1-lughes provided the City data related to tl~e actual costs incturcd in constructing the utilities extensions. The City expressed some initial concern. regarding the amotu~t of costs, which appeared to have been allayed by Mr. Hughes' voluntary d.ccision to rcnrlove sales tax from. his calculati.on~s, among other costs. After these vol>_mtary )01NN M. (7p0bN AIONAR~ ~f. $1'fipfi6N5 CFIAALES A. KLIN0E SAMUEL A. ROIIADOUCii BRIAN D. AMSBARY b~;' lbi Lbb I by: 15 4L545:ib1'L4 (akUtN Sltl-'HtN5KL1NCit NHGE F = Auburn City Council August 10, 2007 Page2of6 CtROEN STEPHENS & kl,1NGr~ LLP deductions, the total costs for the project that were subzx~tted to tl~e City were $471,093. The City also expressed sonrtc preliminary dissatis!'actionwhh the adequacy of the docuznei~tatiou provided in support of those costs. Additional docut~tentation was subsequently provided to confirm those costs. At t}aat point, City Staff no longer expressed any concerns regarding docwnez~tation of the costs. After verifying the $47},093 i.za costs, on November 30, 2007, the City sent .1~4r. Hughes a proposed payback agreement, with instructions to sign and return it for considcratiozz by tl7e City Council. Payback agreements seek reimbursement to the developer froth those owners of properties that will "benefit from future connections or developments" of the utility extension. Auburn Municipal Code ("AIvIC") 13.40.010. Applicable state l.aw explaiz~.s i» further detail that this should `include(e] not only those [properties] dircct:ly connected thereto, but also users connected to laterals or branches con.nectirtg tl3ereto." Revised Code of `~'a5lz.ingtt~n ("RCVv ") 35.91..020_ Jn t1~.e City°s proposed agreement, the $471,093 in costs were divided in pro rata shares among 11 properties (rotating 1.1.2th Avenue SF on a lziear foot basis, See Appendix B (Parcel. N1ap). City staff did not appear to raise any objections to the Agreement that .had been sent to Mr. Hughes for leis signature. 1n fast, City Staff had planned for the Agreezxtent to be placed on the Public Works Commit~:ee Agenda orl December l l , 2006, and the Council Agenda on Dccen~ber 18, 2006. Unfortunately these plans were staJ_led because m.y client discovered that th.e City's proposed. agreezrt.ezat contained aflaw-it included a parcel among the 11 assessed. properties for. which the City had already granted a sewer pezYrtit. Specifically, on December 12, 2005, flee City approved a sewer permit for Michael Baker, owner o.f. Tax ~'arcel No. 2212400].40. See Appendix B (Parcel. Map). Although under the City's proposed payback agreement, this parcel was subject to an assessment o1' $32,017-09 for the sewer, the City only coJ.}ected $933 i1a pernzit `fees. The City Attoz~zey's position is that once a permit .has been granted, the City cannot seek any additional reimbursement from that property owner for any slaortfaJ.l between the actual pro rata share of the costs of construction for this connection and the amount collected.' Accordingly, the City's proposed Agreement, in which this parcel was assessed $32,017.09, was nothing rriore than a request that my client absorb the costs oTthe City's oversight. To date, my client has not received any of the funds collected .from this property owner. The City's position does t?ot appear to be su.pporta.ble, Based upon experiences with payback agreements in other jurisdictions, if a properly owner applies to connect to a new sewer extension before a payback agreement is in. place, other .jurisdiction.smere]y request a deposit from tine new appiicAnt to cover the atrticipated costs of the sewer extension reimbursement. Then, based upon the aett-a] costs reflected in the payback agreement, the applies?~t is either reimbursed for the excess amount collected, qt- assessed fn?' any outstanding balance. This isi also supported. by ~CVV 35,91,020, which does not appear to requite that a ful].v executed payback agreement to he in place to assess a property owner. Instead, it autbori.zes lees] ,jurisdictions to seek reimbursement for tl?.ose who "subsequently tap onto or use the ~systcmJ" after original construction. bo;'1bilbbr by: 15 4154b~b114 GROEN STEPHENSKLINGE PAGE Ei4 AI.ll~tlr'Ct Clty COLLi1C11 Ali~~1St I n. 2007 Page3of6 GROEN STEPHENS & K~_iivcYF J.T~P On the sai~,e day, December 12, 2006, the City also approved. a sewer pernlit for kievin Dad-, owzzer of Tax Parcel No. 2212400200. See Appendix B (Parcel Map). Although ~b.is parcel was not included among the properties identified i.~~ the City's proposed agreement because it did not fi-ont 112th Avenue SI/, it clearly fa1Js under those benefited pz~operties identified in RC~J 35.91.020 as "not only those [properties] directly cozzz~.ected. thereto, but also users connected to latez•als or branches connecting thereto." The City collected ;C~rom Mr. Day a Sewer Charge in Lieu of Assessment of only $4,068. Mr. Day obtai.rted an easement from Tax Parcel No. 22 ] 2400140 (Corbins, who arc predecessors in interest to the Baker. s) an..d Tax 1?ar.:cel No. 2212400210 (Lanctots) to connect to the new extension on 112th Avenue SE by 17rzngiIZg it across their respective properties. See A.ppcndix B (Parcel Map) arzd Appendix C„ at 2 (Joint Side Sewer Agreement "to service three single family homes."). To date, Mr. Hughes 1?as not received anv of the funds collected from this property otivnez'. As soon as M.r. Hu.ghes discovered the flaw in the City's proposed agreement, Mr. Hughes requested. that City Staff revise the agreezz~ezlt by removing the parcel. that the City aJ.ready authorized to connect to the sewer. Unforizztlately, ever since this requ.cst, City Staff have been un.receptivc to supporting any payback agreement. City Staff began asserting, aT.~d cotttiiaues to assert, that Mr. Hughes' costs are too high in comparison. to other allegedly similar .projects. On March J.2, 2007, the City Frzgineer, Dennis SeIle, sent a letter to Mr. T-lu,ghcs informing him t1~at City Staff no ]orzger su,pporLed the payba.clc a.grccment because the costs were purportedly too high. The letter also indica.tcd that "stafFcoul.d not determine a fair and equitable way to address [the] request to remove Tax Parcel No. 221240-0140 from the payback ag~reemelit_" Not coincidentally, this letter was dated. the very same day that the City, apparently all too willing to fiuther exacerbate the problem; approved a sewer permit for Henry and Beverly Knapp, owners of Tai: Parcel No. 221240001.0. See Appendix B (parcel. Map). Although under the City's proposed. agreement this parcel was subject to an assessment of $3],81.8.58 for the sewer., the City only irz~.poscd a Sewer Charge in Lieu o:PAssessment of $3,224,29. To date, I~vlr. Hughes has not received arty of the funds collected from this property owner. Analysis City Staffs attezxzpts to renegotiate project costs contravene City and. state law. The concept that the City T~nust consider the actual costs incurred by the project, and not the City's pi•efen•ed costs, is clearly established, in the City's code: "Payback agreement" shall be defined as an agreement between the city and. a developer for the sole purpose of reii~nbursirig such deve,l.oper for a pro rata portion of the origiiztall costs incurred by that developer for the installation of a. facility extensi.oza to the extent such facilities benefit future connections or developzxzents. 66i18i200? 69:25 4254536224 GROEN STEPHENSKLINGE PAGE 65 Auburn City Cotu~ci] August 10, 2007 Pagc4of6 GROIN STFPt-~>r>`ts & KLt~~G>= LLP ,AMC 13.40,OI0 C (emphasis addedj. Similarly, the state law refers to the sarnc costs as "the original cost of such water or sewer facilities." RCW 35.91..020(1.). The WashingttoT~ State Court o.f Appeals, Division One has interpreted this phrase to mean that The plain language of the statu.tc states that the latecomers must pay a. fuii~ pro rata share of the cost of. construction, Specifically, the most natural and grammatically correct reading of ih.e statute is to conclude that "fair" z~.odif cs "pro rata share," not "cost of construction." The statute does not say that latecomers must pay a pro rata share of the ,fair cn.~f n{ constt~taetiorz. If the Legislature intended to say the latter, it could easily have done so. Zt did not, We will not rewrite the statute... Stolle v. Soutlzwe.ct Suburban Sewer Dist., 116 W>1. App. 434, 65 P.3d l 230 (2003j. Mr. Selle acknowledged this precedent ii.~ leis letter dated March 12, 2007 and. conced.cd that "the City may not negotiate v~~itl~ [Mr. Hughes regarding the costs_..presented for inclusion in Payback Agreement No. 102." Mz. Selle's concession tl3at he cannot negotiate costs appears to be inconsistent wilth a prior letter that he sent to Mr. Hughes. Specifically, on Februat-~~ 7, 2006, Mr. Selle sent a letter that expressly z~egotiatcd costs by stating the fol1owin.g: Auburn is willing to compromise and allow a payback agreement foz $95.00 per lineal foot of property benefited plus $6,000 for side sewer stub and $10,000 for 8" main line extension stubs. Iron.ica.lly, although this letter indicates that it is reasonable to charge parcels $6,000 for a side sewer stub in addition to $95.00 per linear foot of the sewer line adjoi.n,in.g each prt~perty, the City col.l.eeted far less than. $b,000 from each of the parcels identif ed above that ithas authorized to connect to the extension. The City's actions have been wholly irresponsible. 1V][r. I-liu~l~.es' Proposal Although City Staff continue to acknowledge that they cannot negotiate costs, they have also indi.catcd that they cannot support any agreement that includes the $471.,093 in costs that M?~. Hughes has documented. In other words, City Staff still wants to negotiate costs. Linfortunatcly, City Staff offer no solution as to what type of proposed agreear~etit would receive their support. Accordingly, the attached payback agreement represents Mr. Hughes' proposed resolution of this matter. iVlr..I-1ugl2es does not believe that the costs of his project are urtreasonable_ Tlius, t`h.e sttaclied Agreement complies with the obligation to use lvlr. 1-Iughes' actual costs of $471,0'93. The Agt•eemezat includes tlZe original l l pzopcrties included in the City's proposed payback agree,~nerzt, a.ll of which fronted 112th Avenue SE. However, the attac},~ed Agreement has been modified on four points. 09110/200, 09:25 4254536224 GROEN STEPHENSE<LINGE PAGE GCE Auburn City Council August 10, 2007 PageSof6 GROEN STFPI-ii:NS ~ K1.1NGE LLP First, the proposed Agreement adds parcels that do not have frontage on 112th Avenue SL, but nonetheless al-e "usez~s connected, to laterals or branches connecting [to the extension on 1 12th A.ve. SE]" as envisioned by RCW 35.91.020. Specifically, the proposed Agreement includes Tax Parce] No. 2212.400200 (bay), which as previously indicated, has already connected to the sewer extension. Tliis connection was facilitated by the execution o~'a Joint Sicle ~cwcr Agreement with Tax. Parcel N'os. 2212400140 (Corbins) and 2212400210 (l.a,nctois)_ S'ee Appendix F3 (Parcel Map}. Moreover, the inclusion of this parcel in the Agreement appears appropriate in light of a recent letter received from the legal counsel for Mr. Day. Speci~cal)y; the letter ackrtowledgcs a contractual obligation by Mr. Day to "pay any additional costs to the cite should ~Mr. Hughes] reach a payback agreement with the City of Auburzl" Second, the Agreement also includes Tax. Parcel No. 2212400210 (Lanetots). Thee Lanctots are a party to the aforementioned Joint Side Sewer Agreement, wlzicla is expressly intended "to sen~ice three single family l,~omes." In. other words, it is also anticipated that this parcel will cotu~ect to the sewer extension on 112th Avenue SE. Tb.ird, the total costs of the sewer ex.tezzsion were then reallocated izt the attached .~lgreen~ent among all 13 benef ted properties (as opposed to the original 11) based upon their respective linear frontage. This cost rebalancing results in per parcel a.ssesszz~.ents t}~at are sign,if ca~lily lower than. the agree.rzzerzt originally proposed by the City. Fourth, Section VI was modified to remove the second paragraph, which said the City was not liable for failing to collect the lees. Obviously, this odd provision could be misinterpreted to mean that the City did .not have to collect the fees so it was removed. If a payback. agreement is not executed with xny client, it would he tu~.precedeaited. The notion that my client: could expend X471,093 for the benefit of numerous other parcels, without any hope of reimbursement will undoubtedly result in a lawsuit against the City and possibly the bexze.fited property owners. Similarly, the Cities' failure to e~:ecute an agreement would send a clear tx~essage; developers should z~ot do business with the Ctv. City Staff kzas indicated that the City is z~ot obligated to execute payback agreements with developers becau4e RCW 35.91.020 only states that the City "may" enter i.z~to such agreements. IJnfornirtately, the City's practice deruot~strates otherwise. Ou,r understan.cling is that the City l~zas not denied a single payback agreement in the last 12 years. $ecause there are several issues that must he resolved by the City Council, the attached ~4greeznent has not been, sigzzed by Mr. Hughes. We would like to discuss tl~e afore,n~entioned issues directly with, Public Works Committee and the City Council. For example, it. is Mr. Hughes' position that tl~e City should pay him for any shortfall between the actual costs incurred in construction anal the lesser amounts collected by the City for those connectio.tzs that 11a~~e already been authorized by the City, The City, of course, should go back to the propert}J o«~ners for the full amotmt due. Please contact me when this item. has been placed on flee l~'ublic Works Committee's agenda, and ~~Te are available to discuss this matter with City Staff or incliviciual council ro.embcrs. ~~!10;`2607 09:25 4254536224 GROEN STEPHENSI<LINGE PAGE 4=~ Auburn City Coutacil ?s.U~USt ill, ~~~7 Page. G of 6 GROF.N STrPI•)ENS & K1.ING~ LLP Sincerely, CAK/SAR:I ch GROG STLPI-~I~NS & KLZN'G:f~ T~~,P i~ ' . axles A, Klinge G Samuel A. Rodabough "~ cc: Mayor Petez T.cwis Daniel B. Reid, City Attorney Steve Kiz~.g, .A,ssistant City Aitorney De?~o.is Sellc, City Engineer Dennis TJowdy, Public Worles Dzrector. Darcic Hanson, Development Review Coordinator Bill ~Tugb.es K~s-,~ k~