Council bends on subsidy for road completion

Apr. 20, 2013 @ 11:12 PM

City Council members say they’re willing to see their government eat 38 percent of the bill for finishing the street of a north Durham subdivision that was abandoned by its developer.
The prospective deal with homeowners in the Dunwoody neighborhood would cost the city $8,100 and departs from council policy that set a 10 percent cap on completion subsidies in so-called “failed and struggling developments.”
Council members last summer had refused to go higher and cited the fear of setting a precedent for other neighborhoods with uncompleted infrastructure as the reason why.
But Dunwoody residents have argued that their situation is the result of an error on the city’s part. The higher subsidy is in line with a proposal some of the residents floated on Tuesday.
City Manager Tom Bonfield supported the proposal when the council discussed it on Thursday.
“It seems like it could well be a situation where, while none of us might like it, it’s a fair compromise moving forward,” he said. “I’m not one to be caught in a precedent-type thing because every one of these situations might end up being very different.”
Public Works Department officials are expecting completion work in Dunwoody – mainly the application of a final coat of asphalt to Clover Hill Place – to cost $21,000. The subdivision’s 12 homeowners will pay $1,075 each to cover the portion the city doesn’t absorb.
The neighborhood’s leading advocate of the deal, Susan Rogers, acknowledged that homeowners aren’t unanimous in supporting the proposal. But council members advised her to relay word to her neighbors that the new split is as good as it’s going to get.
“If they want the whole loaf, assure them that’s far less likely to get the [council’s] support,” Councilman Don Moffitt told Rogers, alluding to previous requests from Dunwoody leaders that the city foot the entire bill.
City officials since the 2008 real estate crash have been trying to figure out how to deal with neighborhoods abandoned mid-construction by bankrupt developers.
In general, the problem concerns streets, sidewalks, drainage and other infrastructure that doesn’t become public property until Public Works and other department agree it’s been built to the city’s standards.
Developers are supposed to buy insurance to insulate the city from repair costs, but officials have found in a number of cases that the insurance was insufficient to cover likely costs.
And Dunwoody’s problems actually pre-date the crash. Its homes were completed in 2005, and the developer walked away from the project in 2006.
There was a $6,000 insurance policy. But the company that issued it in 2003, Traveler’s Insurance, added a one-year sunset provision that wasn’t part of the standard language the city normally requires. City administrators didn’t catch the change, and the policy duly expired. They concede that, legally, the city has no way to obtain payment.
The $8,100 subsidy Rogers and other homeowners requested includes the $2,100 the city would normally provide under the 10-percent policy, plus the $6,000 the insurance should have provided.
The city will charge the homeowners their share via an “assessment” process normally used for neighborhood-requested infrastructure upgrades.
Homeowners will have five years to pay off the debt. The city won’t charge interest.