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Council approves reimbursement agreement authorization for predevelopment costs on proposed housing site
Summary
The council approved a resolution authorizing a reimbursement agreement allowing developers to be reimbursed for certain predevelopment studies if a proposed transaction closes or otherwise benefits the city; staff said typical costs include environmental studies, appraisal, survey and title work.
The Fruita City Council approved Resolution 2025-24, authorizing the city to enter a reimbursement agreement regarding predevelopment costs for a proposed real estate transaction and development with a private entity referenced in staff comments as "Prop 123."
Dan Carris, assistant city manager, told the council the resolution authorizes the city to establish an agreement to reimburse certain predevelopment expenses that private entities incur while pursuing a purchase and potential development of city-owned or jointly owned real estate. Carris described typical expenses covered by the agreement as Phase I environmental assessments, possible remediation costs to clear property for closing, appraisals, surveys, title work and preliminary soils investigations.
"Much like we did with Lagoon's redevelopment back in 02/18/19, we entered into a reimbursement agreement ... in the event that the project doesn't move forward," Carris said. He added that, if the project proceeds, those predevelopment costs can often be folded into the development financing stack and negotiated for reimbursement, and that legal fees are typically excluded from the city's reimbursement commitment.
Carris said the arrangement is intended to allow the city and potential developer to perform necessary due diligence so the council and the housing authority can make an informed decision about moving forward with a project. He gave an example of a previous project (referred to as "Muse") that had predevelopment costs in the roughly $50,000 range.
The resolution was on the consent agenda and approved as part of the consent vote; council later approved the remaining consent items and the item is recorded as adopted by vote. Council discussed that if the project proceeds the predevelopment costs would be part of the project's financial stack and staff would seek to negotiate repayment where appropriate.
What this means: The city will be able to enter reimbursement agreements that cover certain due-diligence expenses incurred by prospective developers prior to a formal purchase-and-sale agreement, subject to the terms negotiated in each agreement.
