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7. HRSR 09-07-2010ITEM # 7. MEMORANDUM ~~~ TO: Housing & Redevelopment Authority FROM: Catherine Mehelich, Director of Economic Development DATE: September 7, 2010 SUBJECT: Work Session -Discuss DEED Proposed Demolition Loan Program DEED is distributing the attached information to communities in order to gauge the interest level for a new program entitled "Demolition Loan Program". Currently DEED offers a Redevelopment Grant Program that provides funds for acquisition, demolition and remediation activities but only fox sites that have a current private development project in its place. The proposed Demolition Loan Program would provide funds to development authorities or cities for demolition activities on sites even when there is no imminent redevelopment opportunity or plan. DEED is requesting a submittal of potential project information from communities in order to support a request fox legislative funding. At its August 2010 meeting the HRA reviewed information about the DEED Proposed Loan Program and directed staff to draft a list of potential projects for discussion at a work session. Qualifying projects (upon program implementation) must meet the following key criteria: • The property and structures are owned by the development authority (at time of official application); • The structures on the property have been vacant for at least one year; • The structures constitute a threat to public safety because of inadequate maintenance, dilapidation, obsolescence or abandonment; • The structures are not listed on the National Register of Historic Places; • Upon completion of the demolition, the development authority reasonably expects that the property will be improved and these improvements will result in economic development benefits to the municipality. The purpose of the HRA work session is to discuss potential projects fox the DEED Proposed Loan Pxogxam. Staff will provide a verbal update at the meeting. N:\Departments\Community Development\Economic Development\Projects\Demolition Loan Program\9.7.10 IIRA.doc Proposed Demolition Loan Program Page 1 of 2 ~ ~~~~. t~rieet~InrpGnont Ecoa~at~ fear Proposed Demolition Loan Program DEED is proposing an amendment to the Redevelopment Grant Program that would provide funds for demolition activities on sites even when there is no imminent redevelopment opportunity or plan. The following information is for a program that is being proposed to the Legislature but has not been approved, funded or implemented. For proposed language click here. Program Purpose Our traditional Redevelopment Grant Program works well on sites where there are costly impediments to a planned or proposed redevelopment project. But sometimes communities need assistance with demolition and other redevelopment activities on sites where there is no current development plan or where future development visions are hindered by current blight. In some cases, communities may need to address more immediate public safety concerns or hazardous conditions on a site before considering future redevelopment options. To meet those needs, DEED has proposed a Demolition Loan Program to assist development authorities with the costs of demolishing blighted buildings on sites that have future development potential but where there are no current development plans. In the event that the Legislature approves the proposed program, the following criteria would apply: Eligible Applicants Development authorities,including cities, counties, port authorities, housing and redevelopment authorities, and economic development authorities. Eligible Costs These loans would assist with demolition activities, including interior remediation such as asbestos abatement. Loans would pay up to 100 percent of demolition costs for a qualifying site. Loan Parameters Property and buildings must be publicly owned. The following terms would apply: • Loans would be low-interest (2 percent) • Loans would be interest-free for first two years • Principal and interest payments would start in year three if the site has not been developed • If the site is developed, the remaining principal and interest (up to 50 percent of the loan) could be forgiven based on development benefits Potential Project Application Funding for this proposed program is not yet available and would only become available if the program is approved by the Legislature. To gauge the level of interest in and secure future funding for the Redevelopment Grant Program and the newly proposed Demolition Loan Program, we are requesting project information from potential applicants. Download and complete this one-page Potential Project Aoplication. We'll use the information to show the Legislature the level of public support for the programs and to gauge the level of funding they will need. Submit the Form Send your completed Potential Project Application form to: Kristin Lukes Office of Brownfields and Redevelopment Minnesota Department of Employment and Economic Development 1s~ National Bank Building 332 Minnesota Street, Suite E200 St. Paul, Minnesota 55101-1351 For More Information Contact Kristin Lukes at 651-259-7449 or toll free at 1-800-657-3858 or email kristin.lukesno state.mn.us or fax 651-296-1290. ©2010 Minnesota Department of Employment and Economic Development http://www.positivelyminnesota.corn/Government/Financial_Assistance/Site Cleanup_Redevelopment_Fun... 7/22/2010 1167.571 CREATION OF ACCOUNTS. Two redevelopment accounts are created, one in the general fund and one in the bond proceeds fund. Money ~-te~tmts for the grogram may be used to make grants as provided in section 1167.575 and loans as provided in section 1167.5761 and to pay for the commissioner's costs in reviewing applications and making grants and loans and is available until spent. Program income earned may be used for making grants and loans and for administrative costs and are appropriated for such purnose. 1167.572 DEFINITIONS. Subdivision 1. Scope of application. For purposes of sections 1167.571 to 1167.5765, the terms in this section have the meanings given. Subd la Demolition costs "Demolition costs" means the costs of demolition destruction, removal and clearance of all structures and other improvements on the protect site includine interior remedial activities, and groper disposal thereof As used in this subdivision "structure" has the meaning eiven it m sectoon 116G.03. subd. 11. Subd. 2. Development authority. "Development authority" includes a statutory or home rule charter city, county, housing and redevelopment authority, economic development authority, or port authority. Subd. 2a. Metropolitan area. "Metropolitan area" means the seven-county metropolitan area, as defined in section 473.121, subdivision 2. Subd. 2b. Municipality. "Municipality" means the statutory or home rule charter city, town, or, in the case of unorganized territory, the county in which the redevelopment or project is located. Subd. 3. Redevelopment costs or costs. "Redevelopment costs" or "costs" means the costs of land acquisition, stabilizing unstable soils when infill is required, dea~elitieii; infrastructure improvements, and ponding or other environmental infrastructure demolition costs and costs necessary for adaptive reuse of buildings, including remedial activities. Subd. 4. [Repealed by amendment, 1Sp2005 c 1 art 4 s 17] 1167.574 GRANT APPLICATIONS. Subdivision 1. Application required. To obtain a redevelopment grant, a development authority shall apply to the commissioner. The governing body of the municipality must approve the application by resolution. Subd. 2. Required content. The commissioner shall prescribe and provide the application form. The application must include at least the following information: (1) identification of the site; (2) a redevelopment plan for the site; (3) a detailed estimate, along with necessary supporting evidence, of the total redevelopment costs for the site; (4) an assessment of the development potential or likely use of the site after completion of the redevelopment plan, including any specific commitments from third parties to construct improvements on the site; (5} the manner in which the municipality will meet the local match requirement; and (6) any additional information or material the commissioner prescribes. 1167.575 GRANTS. Subdivision 1. Commissioner discretion. The commissioner may make a grant for up to 50 percent of the eligible costs of a project. The determination of whether to make a grant for a site is within the discretion of the commissioner, subject to this section and sections 1167.571 to 1167.574 and available unencumbered money in the redevelopment accounts. The commissioner's decisions and application of the priorities under this section are not subject to judicial review, except for abuse of discretion. Subd. la. Priorities. (a) If applications for grants exceed the available appropriations, grants shall be made for sites that, in the commissioner's judgment, provide the highest return in public benefits for the public costs incurred. "Public benefits" include job creation, bioscience development, environmental benefits to the state and region, efficient use of public transportation, efficient use of existing infrastructure, provision of affordable housing, multiuse development that constitutes community rebuilding rather than single-use development, crime reduction, blight reduction, community stabilization, and property tax base maintenance or improvement. In making this judgment, the commissioner shall give priority to redevelopment projects with one or more of the following characteristics: (1) the need for redevelopment in conjunction with contamination remediation needs; (2) the redevelopment project meets current tax increment financing requirements for a redevelopment district and tax increments will contribute to the project; (3) the redevelopment potential within the municipality; (4) proximity to public transit if located in the metropolitan area; (5) redevelopment costs related to expansion of a bioscience business in Minnesota; (6) multijurisdictional projects that take into account the need for affordable housing, transportation, and environmental impact; or (7) the project advances or promotes the green economy as defined in section 1167.437. (b) The factors in paragraph (a) are not listed in a rank. order of priority; rather, the commissioner may weigh each factor, depending upon the facts and circumstances, as the commissioner considers appropriate. The commissioner may consider other factors that affect the net return of public benefits for completion of the redevelopment plan. The commissioner, notwithstanding the listing of priorities and the goal of maximizing the return of public benefits, shall make grants that distribute available money to sites both within and outside of the metropolitan area. Unless sufficient applications are not received for qualifying sites outside of the metropolitan area, at least 50 percent of the money provided as grants must be made for sites located outside of the metropolitan area. Subd. 2. Application cycles. In making grants, the commissioner shall establish semiannual application deadlines in which grants will be authorized from all or part of the available money in the accounts. Subd. 3. Match required. In order to qualify for a grant under sections 1167.571 to 1167.575, the municipality must pay for at least one-half of the redevelopment costs as a local match from any money available to the municipality. Subd 4 Grant Repayment If a proiect fails to substantially provide the public benefits listed in the grant application within five nears from the date of the grant award the commissioner shall require that 100°Io of the grant amount be repaid by the development authority over a term not to exceed ten years. The commissioner may exercise discretion to require repayment of onlyportion of the grant amount taking into account the public benefits venerated by the completed development. 1167.5761 LOANS. Subdivision 1 Authority The commissioner may make loans to development authorities for proiects that meet the criteria under sections 1167 5761 to 1167 5764 The commissioner may make a loan for up to 100 percent of the estimated demolition costs of the proiect The determination whether_to make a loan for a proiect is within the discretion of the commissioner subject to this section and sections 1.167.5761 to 1167 5764 and available unencumbered money in the redevelopment accounts. The commissioner's decisions and application of the priorities under this section are not subiect to iudicial review, except for abuse of discretion. Subd 2 Fees The commissioner may set and collect fees for costs incurred by the department in operating the loan program including costs for personnel professional and administrative services. Fees charged directly to borrowers upon executing a loan agreement may not exceed two percent of the loan amount. Servicing fees relating to loan repayments may not exceed two percent of the loan repayment. Subd. 3. OualifyingProiects A proiect qualifies for a loan under this section if the following criteria are met: (1) the property and structures are owned by the development authority; (2) the structures on the property have been vacant for at least one year: (3) the structures constitute a threat to public safety because of inadequate maintenance, dilapidation, obsolescence or abandonment; (4) the structures are not listed on the National Register of Historic Places; (5) upon completion of the demolition the development authority reasonably expects that the property will be improved and these improvements will result in economic development benefits to the mumcipalrty. 116T.5762 LOAN APPLICATIONS. Subdivisionl Application Required To obtain a demolition loan a development authority shall apply to the commissioner The governing body of the municipality must approve the application by resolution. Subd 2 Required Content The commissioner shall prescribe and provide the application form. The implication must include at least the following information: (1) identification of the property: (2) proof of ownership by the development authority; (3) a description of how the structures on the property constitute a threat to public safety are functionally obsolete and/or are economically unfeasible to repair; (4) length of vacancy: (5) a detailed estimate alone with supporting evidence of the total demolition costs for the proiect; (6) evidence that the structures on the_property are not listed on the National Register of Historic Places; (7) an assessment of the development potential or likely use of the property after completion of the demolition plan; (8) the current appraised or assessed value of the property; (9) financial documentation necessary for loan underwriting; (10) other sources of funding if the total estimated demolition costs exceed the Loan amount; (11) the proposed source of funds to be used for repayment of the loan: (i2) information showing the applicant's financial condition and ability to repay the loan; (13) the proposed term and principal repayment schedule for the loan; (14) the statutory authorization for the applicant to issue bonds together with a statement that the statutorYprovision authorizes the use of proceeds of such bonds to pay demolition costs and secure the loan: and (15) any additional information the commissioner prescribes. 116T.5763 PRIORITIES Subdivision 1. Priorities. (a) If applications for loans exceed the available appropriations loans shall be made for proiects that, in the commissioner's judgment provide the highest return in public benefits for the public costs incurred "Public benefits" include health safety and other environmental benefits, blight reduction including theproperty's potential for improved economic vitality functionality and aesthetics, community stabilization crime reduction reduced maintenance costs and the potential for future development In making_this judgment the commissioner shall consider the following: (1) the extent to which the existing~property conditions threaten public safety: (2) the len h of vacancy of the property: (3) the development~otential of the propertys (4) the proximity of theproperty to existing sufficient public infrastructure; (5) the applicant's financial condition and ability to repay the loan. (b) The factors in paragraph (a) are not listed in a rank order or priority rather the commissioner may weigh each factor depending upon the facts and circumstances as the commissioner considers appropriate The commissioner may consider other factors that affect the net return of public benefits. Subd 2 Application Cycle The commissioner shall establish semiannual application deadlines in which loans will be authorized from available money in the accounts. 116T 5764 LOAN TERMS AND CONDITIONS. Subdivision 1 Terms Loans to development authorities for demolition costs may be made by the commissioner subject to the following terms and conditions: 1. the a¢reement to repay the loan must be a general obligation of the development authority, payable primarily from a dedicated source of revenue and the development authority must deliver rts bond or note to the commissioner to secure the loan• 2. the term of the loan may not exceed 15 years; 3. the loan shall bear interest at a rate equal to two.percent but interest will not accrue during the first two years of the loan term: 4. the development authority shall make semiannual interest payments and annual principal payments beginning in the third year of the loan until the end of the term 5. the ,principal amount of a loan may not exceed $1,000,000; 6. loan proceeds shall be disbursed for eligible demolition costs as incurred or paid by borrower and won submission of invoices and other supporting documentation satisfactory to the commissioner; 7. An eli ible borrower shall establish a dedicated source of revenue for repayment of the loan. Subdivision 2 Modification of loan terms The commissioner has the discretion to consent, to the modification of the rate of interest time of payment installment of principal or interest, or other term of a loan made under sections 1167.5761 to 1167.5764. Subd 3 Forgiveness The commissioner ma~forgY,'ve principal of the loan and interest accrued but unpaid thereon if an~ up to 50°Io of the original loan amount upon completion of the redevelopment plan,_if the proiect would otherwise have received grant funding in the most recent semiannual grant round, based on the priorities in section 1167.575. 116T.5765 NONLIABILITY. The state shall have no responsibility or liabilit relating to or arising out of activities at the site of a proiect solely by reason of the making_of a grant or loan by the commissioner under sections 1167.5761 to 1167.5764. Minnesota Department of Employment and Economic Development Redevelopment Grant Program and Proposed Demolition Loan Program Potential Project Application To gauge the level of interest in and secure future funding for the Redevelopment Grant Program and the newly proposed Demolition Loan Program, we are requesting project information from potential applicants. Complete this one-page Potential Project Application. We'll use the information to show the Legislature the level of public support for the program and identify the level of funding the programs will need. • Please submit one form per project. An entity may submit more than one form. • Indicate whether you are interested in a Redevelopment Grant or a Demolition Loan. • List your organization, along with a contact person with telephone and email address. • Describe the past use and current conditions of the project area. • Describe the proposed redevelopment or redevelopment potential of the area. Include estimated job creation numbers, property tax increase and current and estimated future property value. The future value estimates can be very preliminary. Your best reasonable guess should be adequate. Indicate whether the development is an idea, plan or secured proposal. • .Provide a project budget which includes a list of eligible activities and costs for each. Eligible Redevelopment activities include acquisition, demolition, soil stabilization, infrastructure improvements and ponding or other environmental infrastructure. Eligible demolition costs include demolition, destruction, removal, clearance and disposal of all structures including interior remedial activities. • Provide an estimated timeline for the eligible activities including start and end dates for each action. More information about the Redevelopment Grant Program and the Proposed Demolition Loan Program can be found on DEED's website at www.positivelyminnesota.com ,click For Local Government, Financial Assistance, Site Cleanup and Redevelopment Funding. You will also find this form at the website as well. SEND FORM TO: Kristin Lukes, Director Office of Brownfields and Redevelopment Department of Employment and Economic Development 1St National Bank Building 332 Minnesota Street, Suite E200 St. Paul, Minnesota 55101-1351 Kri stin.lukes~a,state.mn.us (651) 259-7449 FAX: 651-296-1290 Redevelopment Grant Program and Proposed Demolition Loan Program Potential Project Application Type of application: ^ Redevelopment Grant Program ^ Proposed Demolition Loan Program Applicant (public entity) Name of Organization: Street Address: City/Zip: Name of Contact: e-mail: Phone: Describe site history and current site conditions. (250 words or less) Describe proposed redevelopment project. For Proposed Demolition Loan Program, describe the redevelopment potential. (250 words or less) Current assessed value of project area: $ Estimated future value after site is prepared for development: $ Estimated future value after redevelopment occurs: $ Provide a list of eligible activities and estimated costs for each. Provide an estimated timeline for eligible activities.