Item No: 5C
Meeting Date: March 12, 2012
From: Fred Morrison, City Attorney
Subject: Ordinance extending the timeframe of Utility Bonds & Letters of Credit
Staff recommends adoption of the proposed ordinance to extend the time allowed for developers to claim reimbursements for utility installation expenses and the time for which developers may leave in place a bond or letter of credit intended to reimburse the City for electrical infrastructure costs prior to being required to pay the reimbursement directly.
The City has an ordinance relating to installation of electrical utility infrastructure within developments. It provides that under certain circumstances a developer may claim reimbursements from the City for costs incurred. It also provides for the City to install portions of the infrastructure at City expense, to be reimbursed by the developer if there are not a sufficient number of customers connected to the infrastructure within a two year period. That obligation is to be secured by a bond or letter of credit.
When the economy experienced a profound downturn in 2008, the City began receiving numerous requests to extend the time limitations imposed by this ordinance. The Commission recognized that it was not possible for developers to meet the deadlines of the ordinance in the poor economy and amended the ordinance to provide for an automatic extension of two years, which expired December 31, 2011.
The housing market has not improved substantially, if at all, and the City is once again beginning to receive individual requests for extensions on an ad hoc basis. Staff proposes to amend the ordinance once again to allow an additional two year extension, through December 31, 2013. The ordinance before the Commission would create that additional extension. It is the hope of staff that by the end of 2013 the economy will have improved sufficiently that the development community could once again meet the requirements of the ordinance as originally written, without the extensions of time.
Adopt the ordinance as presented, decline to adopt the ordinance, adopt the ordinance with changes such as a longer or shorter extension period, or such other action as the Commission deems appropriate.
The ordinance will not require any direct expenditure of City funds. The City will, however, forego the investment value of money it would receive if it were to call in the bonds and letters of credit now rather than extending the deadline for developer performance. Also, it is possible there may be a slight increase in the risk of developer default but that possibility, and potential loss of revenue, are not quantifiable.
Department: __City Attorney_ _
Prepared by: __Fred Morrison
Attachments: Yes____ No __X___
Advertised: ____Not Required ______
Attorney Review : Yes_X_ No ____
Reviewed by: Dept. Head ________
Finance Dept. __________________
Deputy C.M. ___________________
City Manager ___________________
Account No. _________________
Project No. ___________________
WF No. ______________________
ORDINANCE NO. _________
AN ORDINANCE OF THE CITY OF LEESBURG, FLORIDA, AMENDING §25 – 474 OF THE CODE OF ORDINANCES PERTAINING TO INSTALLATION OF THE ELECTRICAL DISTRIBUTION SYSTEM IN SUBDIVISIONS AND NEW DEVELOPMENTS; PROVIDING FOR AN EXTENSION OF THE CURRENT FOUR YEAR DEADLINE TO OBTAIN REIMBURSEMENTS FOR THE DIFFERENCE IN COST BETWEEN OVERHEAD AND UNDERGROUND SERVICE IF THE DEVELOPER PAYS UP FRONT FOR THE COST OF INSTALLING THE INFRASTRUCTURE; PROVIDING FOR AN EXTENSION OF THE CURRENT FOUR YEAR DEADLINE FOR THE CITY TO DRAW DOWN ON ANY BOND, CASH DEPOSIT OR LETTER OF CREDIT PLACED WITH THE CITY AS ASSURANCE OF FUTURE PAYMENT WHERE THE DEVELOPER DOES NOT PAY THE COST OF INSTALLING THE INFRASTRUCTURE UP FRONT; LIMITING THE BENEFITS OF THE EXTENSIONS HEREIN CREATED TO THOSE DEVELOPMENTS IN WHICH THE CURRENT DEADLINE WILL EXPIRE ON OR BEFORE DECEMBER 31, 2013; REPEALING CONFLICTING ORDINANCES; PROVIDING A SAVINGS CLAUSE; AND PROVIDING AN EFFECTIVE DATE;
BE IT ENACTED BY THE PEOPLE OF THE CITY OF LEESBURG, FLORIDA:
§25 – 474 of the Code of Ordinances of the City of Leesburg, Florida, is hereby amended to read as set forth below:
Sec. 25-474. Installation of electrical distribution system.
(a) Whenever a real estate owner, promoter or developer, private or corporate, desires to develop a plot or tract of land, an apartment, a condominium, an office, housing units of two (2) or more units or other physical facility either by contracting a building or buildings of two (2) or more units thereon, or by subdividing the realty, within the electrical distribution area of the city, the city will install the electrical distribution system within the subdivision, tract or plot of land, an apartment, a condominium or office or housing units of two (2) or more units only upon the payment by the developer to the city of the total estimated cost of the installation of the electrical distribution system within the tract or plot of land, an apartment, a condominium, a subdivision or office or housing units or two (2) or more units, whether such system be underground or overhead.
(b) The real estate owner, promoter or developer shall be reimbursed for the installation cost as residences or other buildings are built and occupied and the electricity is permanently turned on for the residences or other buildings solely for a permanent occupant for each unit, who dealt at arms length with the owner, promoter or developer. Reimbursement to the real estate owner, developer or promoter shall not be made until the city shall be assured that the normal flow of electricity to each unit shall be at a rate of kilowatt hours which shall average the approximate flow to similar units occupied for at least one (1) year and then receiving electricity from the city. The rate of reimbursement for each unit shall be determined by dividing the total number of installed meters into the sums paid by the real estate owner, developer or promoter of the city. If one (1) home or building is built in two (2) or more units, then the owner, developer or promoter shall be reimbursed accordingly. A unit is defined as a compartment, office, apartment or house as the case may be.
(c) The reimbursement will be for the cost of the distribution system for overhead only, with the understanding that the real estate owner, developer or promoter shall pay for the cost difference between underground and overhead service. Reimbursements will be limited to a period of four (4) years following payment of the installation cost of the system by the real estate owner, developer or promoter, to the city. The city commission may elect to waive the four-year limitation for a period of up to one hundred and eighty (180) days, upon application by the real estate owner, developer, or promoter, if the city, at its discretion, determines that conditions beyond the control of the developer delayed the requirements for reimbursement under this section. Furthermore, as to any development or project for which the four (4) year deadline herein established to claim the reimbursement expires on or before December 31, 2013, such deadline shall be extended automatically for a period of two (2) years after the current deadline, without action by the City Commission, provided however that this extension provision shall terminate on January 1, 2014 and shall not be available for any development or project as to which the current four year deadline expires on or after that date.
(d) The city will install at its cost service lines and poles from the distribution line to the masthead and will not require contribution from the owner of the home desiring electric services unless such service line, in the sole opinion and discretion of the city, requires more than one (1) electrical pole, in which event the person requesting such service shall pay for the cost of such additional poles and installation thereof.
(e) In lieu of the payment required by subsection (a) of this section, the city may, at its option, by contract approved by the city commission, allow the developer to post a bond acceptable to the city, either surety or cash, or a letter of credit acceptable to the city, which bond or letter of credit will be conditioned to pay the sums required under subsection (a) of this section less any rebates which would have been made under the terms of this article, and which bond or letter of credit will be payable four (4) years from the date same is given. Upon the payment thereof, the developer, or surety, as the case may be, will be entitled to the pro rata reimbursement as contemplated by this article. Furthermore, as to any development or project for which the four (4) year deadline to draw on the bond or letter of credit expires on or before December 31, 2013, such deadline shall be extended automatically for a period of two (2) years after the current deadline, without action by the City Commission, contingent on the developer placing with the City an acceptable replacement bond, cash deposit or letter of credit payable on or before two (2) years from the expiration of the deadline to draw on the initial bond or letter of credit, and provided further that this extension provision shall terminate on January 1, 2014 and shall not be available for any development or project as to which the current four year deadline expires on or after that date.
All ordinances or part of ordinances which are in conflict with this Ordinance are hereby repealed, to the extent necessary to alleviate the conflict, but shall continue in effect insofar as they are not in conflict herewith, unless repeal of the conflicting portion destroys the overall intent and effect of any of the conflicting ordinance, in which case those ordinances so affected shall be hereby repealed in their entirety.
If any portion of this Ordinance is declared invalid or unenforceable, and to the extent that it is possible to do so without destroying the overall intent and effect of this Ordinance, the portion deemed invalid or unenforceable shall be severed herefrom and the remainder of the ordinance shall continue in full force and effect as if it were enacted without including the portion found to be invalid or unenforceable.
This Ordinance shall become effective upon its passage and adoption according to law. Once this Ordinance takes effect, the extension of the deadline for bonds, letters of credit and reimbursements to December 31, 2013, in subsections (c) and (e), shall relate back to December 31, 2011, so that those eligible for the extension previously enacted shall remain eligible for the additional extension herein provided.
PASSED AND ADOPTED at the regular meeting of the City Commission of the City of Leesburg, Florida, held on the day of , 2012.
THE CITY OF LEESBURG, FLORIDA