City reviews $250,000 letter of credit tied to development agreement; bank ratings and renewal protocol explained

City staff presented information Monday about a $250,000 letter of credit required under a development agreement for a private development (identified in the discussion as Agresto). The city attorney’s office explained the letter of credit is intended to secure funds to cover consultant and study costs outlined in the development agreement and to be available if there is a default or termination event.

Assistant City Attorney Gustin described the instrument as largely identical to a prior letter of credit used in the Fufeng project: “This letter of credit should look familiar. It was parroted from the Fufeng letter of credit. The terms and conditions were essentially are the same,” Gustin told the council. Staff explained the letter automatically renews each Sept. 30 unless the issuing bank gives a 60-day non-extension notice; if the bank declines to extend, the developer (Agresto) may replace the letter with another instrument or deposit funds with the city to cover obligations.

Gustin noted bank-rating requirements to satisfy city procurement standards: the issuing bank must have an S&P rating of A-minus or higher and Moody’s of A3 or higher. City finance staff had reviewed the proposed bank and determined it meets those requirements, and Gustin said staff expected the document to be signed and delivered by the end of the month. The item was presented for information only; no action was required at Monday’s meeting.

The council did not take formal action on the development agreement during the informational briefing; staff said the letter of credit remains in place until the project reaches substantial completion or other termination conditions are satisfied.