HomeMy WebLinkAboutDoc 562 - Tetherow Agrmt AmendmentDeschutes County Board of Commissioners
1300 NW Wall St., Suite 200, Bend, OR 97701-1960
(541) 388-6570 - Fax (541) 385-3202 -www.deschutes.org
AGENDA REQUEST & STAFF REPORT
For Board Business Meeting of 10/20/14
DATE: 10114114
FROM: Will Groves CDD 388-6518
TITLE OF AGENDA ITEM:
Consideration and Signature of Document No. 2014-562, AMENDMENT NO.9 TO CONTRACT NO.
2007-380, Amending an Improvement Agreement bewteen Deschutes County and Weston Investment
CO., LLC. regarding the financial security for the overnight lodging units at the Tetherow Destination
Resort
PUBLIC HEARING ON THIS DATE? No
BACKGROUND AND POLICY IMPLICATIONS:
This is the ninth amendment to the improvement agreement that requires one of the developers of the
Tetherow Destination resort to provide the statutorily and Deschutes County Code required financial
assurances for the construction of the required overnight lodging units. Amendment No.8 was entered
into by the parties to extend the expiration of the Improvement Agreement for 60 days while
representatives for the parties discussed issues related to the financial assurance. That amendment expires
October 28, 2014. Should that agreement expires, it would result in there being no financially assured
overnight units and the Resort falling out of compliance with existing land use approvals. Weston
Investment Co. LLC submitted this request to Deschutes County to amend the Improvement Agreement to
extend the expiration date for another year.
During review of Amendments #7 and #8, Staff expressed concern that the existing financial security may
be insufficient to cover the remaining construction costs, based on several standard industry cost
estimation methodologies. The applicant argues and staff concurs that updating the construction cost
estimate and financial security at this time is not appropriate since this security will need to be revised
again shortly. This is because the applicant intends to update the overnight lodging site plan and
improvement agreement to change the type of proposed overnight lodging from lodge-hotel to
individually-owned overnight units in the coming year.
The present amendment includes provisions for the County to require an updated cost estimate and
financial security at any time after June 15,2015.
FISCAL IMPLICATIONS:
If the applicant fails to construct the required overnight lodging units under this Amendment No.9, the
County may not have sufficient funds to complete the construction of those units. The County will then
have to retrieve the money guaranteed by the Irrevocable Letter of Credit and decide at that time how best
to spend the $8.7 million that will provide for the the construction of the units.
RECOMMENDATION & ACTION REQUESTED:
Motion: Approve signature of Document 2014-562.
ATTENDANCE: Will Groves
DISTRIBUTION OF DOCUMENTS: CDD Staff.
MEMORANDUM
DATE: August 15, 2014
TO: Board of County Commissioners
FROM: Will Groves, Senior Planner
RE: Doc No. 2014-562 - Tetherow Destination Resort, Improvement Agreement No. 9
Issue
Weston Investment Co. LLC submitted a request to Deschutes County to amend their
improvement agreement. An amendment to the Tetherow Destination Resort (“Resort”)
Improvement Agreement must be completed by October 28, 2014, or the current Improvement
Agreement will expire. This would result in there being no financially assured overnight units
and the Resort falling out of compliance with existing land use approvals.
Background
On July 23, 2007, the Deschutes County Board of County Commissioners (“Board”) approved
an Improvement Agreement (valued at $16m and recorded at Vol. 2007, Page 380) for the
financial assurance of the required 150 units of Overnight Lodging for the Resort on Tract AB of
their property. The County and Developer subsequently amended the Agreement eight times.
Amendment Nos. 1 through 8 referenced above:
Original IA Arrowood bonds for 150 Overnight Units at Tetherow under a Site Plan
(SP-07-6).
Amount $16m – for 48 “lodge homes”.
Completion Date – Recorded Phase I Plat (9/24/2007) plus two years.
Three one-year extensions allowed. (to 9/24/12)
Units to be located on Tract AB
Amendment #1 Changes Bonding Company
Amendment #2 Arrowood bonds for 198 (150+48) Overnight Units at Tetherow under a
Site Plan (SP-07-6/MC-08-6).
Amount $8.7m
Amendment #3 One Year Extension and changed bond to an ILOC
Page 2 of 3
Amendment #4 One-Year Extension
Amendment #5 One-Year Extension
Amendment #6 Weston bonds for 198 (150+48) Overnight Units at Tetherow under a Site
Plan (SP-12-11). Changes overnight to two hotel buildings with 94 and 74
overnight units and four "cottages" containing 30 units between the four
"cottages".
Amount $8.7m
Units to be located on Tract AA
Completion Date – Recorded Agreement (8/28/2012) plus two years.
Three one-year extensions allowed. (8/28/17)
Amendment #7 Site Plan updated to SP-12-22.
Amendment #8 Extend the expiration 60 days.
Amendment #9
(Proposed) Extend the expiration 1 year. Includes provisions for the County to
require a cost estimate and financial security at any time after June 15,
2015.
Current Amendment Request
The present amendment extends the agreement for 1 year. During review of Amendments #7
and #8, Staff expressed concern that the existing financial security may be insufficient to cover
the remaining construction costs, based on several standard industry cost estimation
methodologies. This issue is discussed in detail below. Staff has learned that the applicant, in
the coming year, intends to revise the overnight improvement site plan and improvement
agreement to change the type of proposed overnight lodging from lodge-hotel to individually-
owned overnight units. The applicant argues and staff concurs that updating the construction
cost estimate and financial security at this time is not appropriate, since this security will need to
be revised again shortly.
The current amendment includes provisions for the County to require a cost estimate and
financial security at any time after June 15, 2015. This intended to provide a specific timeline to
update the cost estimate and financial security, in the event the applicant has not otherwise
amended the overnight improvement site plan and improvement agreement before that time.
Issues to be Resolved in a Future Amendment
During the process for Amendment Nos. 7 and 8, Staff requested that the applicant update the
construction estimate and associated bonding for the overnight units in association with the
present Amendment No. 9. This is because the construction estimate is a 2008 estimate for the
construction of 198 overnight units configured as 48 “lodge homes”. Since then, the applicant
has modified the Site Plan to configure the units as hotel style structures, received approval to
reduce the number of units to meet the 2.5:1 (residential: overnight) unit ratio, and constructed a
26-unit lodge building. At present, the applicant must complete 133 overnight units, approved
as 94- and 39-unit hotel structures.
Page 3 of 3
The current ILOC is for $8.7m. However using a number of hotel industry construction
estimation tools, Staff estimates that completion of 133 overnight units as a 3-star, midscale
hotel would cost $13.8m1, $10.3m2, or $14-$18m3. Deschutes County should have a financial
assurance in place for the required overnight units at all times that is sufficient to complete the
approved overnight units. Regardless if any of these estimates are correct or if the existing
$8.7m would cover the construction costs, the Board, as part of a future amendment, should
discuss whether it is appropriate to have the applicant:
1) Provide a new construction estimate that is based on 2014 construction costs and
covers the type of unit actually approved for construction; and,
2) Include a financial assurance that matches the current cost estimates.
Attachments
1. Amendment No. 9.
2. Verification of the continued validity of the ILOC from Wells Fargo
1 Based on extrapolation of the completed 26-unit lodge building’s County building permit estimate.
2 HVS Hotel Development Cost Survey – WWW.HVS.COM
3 Rider Levett Bucknall construction cost calculator - www.rlbintelligence.com/
PAGE 1 OF 3 – AMENDMENT NO. 9 TO CONTRACT NO. 2007-380, DC Document No. 2014-562
For Recording Stamp Only
DOCUMENT NO. 2014-562
AMENDMENT NO.9 TO CONTRACT NO. 2007-380
That certain Improvement Agreement, Deschutes County Document No. 2007-380, recorded in the Deschutes
County Official records at 2007-53411, (“Agreement”) by and between DESCHUTES COUNTY OREGON, a
political subdivision of the State of Oregon (“County”) and ARROWOOD DEVELOPMENT, LLC, an Oregon
limited liability company (“Developer”), dated August 29, 2007, together with:
Amendment No. 1, Deschutes County Document No. 2007-493, recorded in the Deschutes County Official
Records at 2007-53412;
Amendment No. 2, Deschutes County Document No. 2008-576, recorded in the Deschutes County Official
Records at 2008-43806;
Amendment No. 3, Deschutes County Document No. 2009-510, recorded in the Deschutes County Official
Records at 2009-42805;
Amendment No. 4, Deschutes County Document No. 2010-289, recorded in the Deschutes County Official
Records at 2010-37552; and
Amendment No. 5, Deschutes County Document No. 2011-509, recorded in the Deschutes County Official
Records at 2011-29853;
Amendment No. 6, Deschutes County Document No. 2012-485, recorded in the Deschutes County Official
Records at 2012-33642;
Amendment No. 7, Deschutes County Document No. 2014-127, recorded in the Deschutes County Official
Records at 2014-07620
Amendment No. 8, Deschutes County Document No. 2014-462, recorded in the Deschutes County Official
Records at 2014-28351
is amended as set forth below, effective upon signature of all parties hereto (“Amendment No. 89”). All other
provisions of the Agreement remain the same and in full force.
The above listed contract is amended as follows, effective upon signature of all parties:
1. Section 3 Exhibits
3.6. Exhibit HI –Verification by Wells Fargo of amendments to and extension of expiration date of
Irrevocable Letter of Credit No. NZS648008 consistent with this Amendment No. 98.
3. Construction of Overnight Lodging Required Improvements
5.3 Developer shall cause the Overnight Lodging Required Improvements to be inspected by and
receive final written construction approval from County and/or State of Oregon not later than
August 28, 2015 than 60 (60) days from the date of this Amendment No. 8 to the Agreement is
recorded in the Deschutes County Official Records (“Completion Date”).
4. Security for Overnight Lodging Required Improvements
16.4 Cost Update Notice
16.4.1 At any time after June 1, 2015, the County may require the Developer to provide
updated construction costs for the Overnight Lodging Required Improvements then
remaining to be constructed (the “Cost Update Notice”).
REVIEWED
______________
LEGAL COUNSEL
PAGE 2 OF 3 – AMENDMENT NO. 9 TO CONTRACT NO. 2007-380, DC Document No. 2014-562
16.4.2 Upon County receipt of an application for partition and/or a new or revised site plan for
Tract AA than the site plan stated in Amendment No. 8 to this agreement, the County
may require the Developer to provide the Cost Update Notice in addition to an
amendment to this agreement as amended.
16.4.3 Upon receipt of the Cost Update Notice, the Developer shall have a period of 30 days to
provide the information required in the Cost Update Notice to the County (the
“Developer’s Response”).
16.4.4 Upon receipt of the Developer’s Response, or if no Response is received within the 30
day period, if the County determines that the Developer’s obligations under this
Agreement as amended, together with the Irrevocable Letter of Credit No. NZS648008
do not provide adequate financial assurance for completion of the Overnight Lodging
Required Improvements, the County shall have the option to require Developer to
increase the amount of Irrevocable Letter of Credit No. NZS648008 and to memorialize
such increase in a further amendment of this Agreement (the “ILOC Amendment”).
16.4.5 If the County requires Developer to increase the amount of the Irrevocable Letter of
Credit NZS648008m Developer shall also file the application fees and materials to
amend this agreement to memorialize that increase in the financial security.
16.4.6 Upon receipt of the County’s notice to increase the amount of Irrevocable Letter of
Credit No. NZS648008, the Developer shall have a period of 30 days within which to do
so and to file the required application fees and materials to permit the County to
process the ILOC Amendment.
5. Liens.
29.4. The Agreement as amended by Amendments 1 through 8 9 shall have priority on the subject
property over all other interest holders other than the owner.
SIGNATURES ON THE FOLLOWING PAGE
PAGE 3 OF 3 – AMENDMENT NO. 9 TO CONTRACT NO. 2007-380, DC Document No. 2014-562
Dated this __ day of October, 2014
WESTON INVESTMENT COMPANY, LLC, an
Oregon limited liability company
By:
Name:
Title:
STATE OF OREGON )
) ss.
County of ____________ )
Before me, a Notary Public, personally appeared ________________ the______________ for Weston
Investment Company, LLC and acknowledged the foregoing instrument on behalf of Weston Investment
Company, LLC.
DATED this __ day of October, 2014
______________________________
Notary Public for Oregon
My Commission Expires: _________
Dated this _______ of October, 2014 BOARD OF COUNTY COMMISSIONERS
OF DESCHUTES COUNTY, OREGON
______________________________________
TAMMY BANEY, Chair
______________________________________
ANTHONY DEBONE, Vice Chair
ATTEST:
______________________________________
Recording Secretary
______________________________________
ALAN UNGER, Commissioner
STATE OF OREGON )
) ss.
County of Deschutes )
Before me, a Notary Public, personally appeared TAMMY BANEY, ANTHONY DEBONE, and ALAN UNGER and
the above-named Board of County Commissioners of Deschutes County, Oregon and acknowledged the
foregoing instrument on behalf of Deschutes County, Oregon.
DATED this _____ day of _______________, 2014.
__________________________________________
Notary Public for Oregon
My Commission Expires: _____________________
PAGE 4 OF 3 – AMENDMENT NO. 9 TO CONTRACT NO. 2007-380, DC Document No. 2014-562
EXHIBIT H
Deschutes County, Oregon
117 NW Lafayette
Bend, Oregon 97701
Attention Deschutes County Planning Director
Re: Wells Fargo Bank, NA
Letter of Credit No. NZS648008
Reference is made to that certain Letter of Credit No. NZS648008. This Letter of Credit remains as valid
security for the Improvement Agreement and all terms expressed in Amendment No. 9.
Very truly yours,
WELLS FARGO BANK, N.A.
Cc: Keith Vernon
2154 NE Broadway
Portland, Oregon 97232