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7.4 HRSR 08-03-2015 tio,k -�- Request for Action River To Item Number Housing and Redevelopment Authority 7.4 Agenda Section Meeting Date Prepared by General Business August 3, 2015 Amanda Othoudt, EDD Item Description Reviewed by HRA Blighted Properties &Forgivable Residential Cal Portner, City Administrator Loan program Reviewed by Action Requested Review and comment on the final draft of the HRA Blighted Properties Forgivable Residential Loan program policy and application. Staff will bring back for formal approval at the next scheduled meeting. Background/Discussion After several discussions and workshop sessions, the HRA directed staff to develop a program to meet the untapped need for assistance with demolition and other redevelopment activities when either there is no current development plan or where future development visions are hindered by current blight. In some cases, despite a potential for future redevelopment,hazardous conditions or other public safety factors may become a community's immediate concern. Securing and maintaining vacant dilapidated structures is costly. Therefore, the Blighted Properties Demolition & Forgivable Housing Loan program includes funding for demolition activities when an imminent redevelopment opportunity does not currently exist. The city attorney, Springsted, and the finance department have had an opportunity to review and comment on both the residential policy and application. Overview of the Blighted Properties Forgivable Residential Loan program The Blighted Properties Forgivable Residential Loan Program operates on a semi-annual application cycle. Applications are due February 1 and August 1 of each year. Qualifying Projects 1. Upon completion of the project, the property and structures will be owner-occupied dwellings; 2. The structures constitute a threat to public safety because of inadequate maintenance, dilapidation, obsolescence, or abandonment; 3. The structures are not listed on the National Register of Historic Places; 4. Upon completion of the demolition, the HRA reasonably expects that the property will be improved and these improvements will result in economic development benefits to the municipality. Eligible applicants for this program must be the owner of the property at the time of the application or before disbursement of funds. 1 r i t � r NATURE Eligible Program Costs: The Demolition Loan Program can pay up to 75,000 of the acquisition and demolition costs for a qualifying site. "Demolition costs" means the costs of demolition, destruction,removal, and clearance of all structures and other improvements on the project site,including interior remedial activities, and proper disposal thereof. Terms Loans for acquisition and demolition costs may be made subject to the following terms and conditions: 1. The agreement to repay the loan may be a general obligation of the property owner,payable primarily from a dedicated source of revenue, or other security subject to review and approval by the HRA commission. 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 property owner shall make monthly 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$75,000; 6. Loan proceeds shall be disbursed for eligible demolition costs as incurred or paid by the borrower and upon submission of invoices and other supporting documentation satisfactory to the commission; Forgiveness The HRA may forgive the principal of the loan and interest accrued but unpaid thereon,if any,up to 50 percent of the original loan amount, not to exceed the costs of demolition,upon completion of the project. Required Appraisals or Assessments Land appraisals of the current (as-is) and expected (pre-construction) value of the site are required so that the HRA can determine the fair market value and any public subsidy. Both appraisals must be done by an independent appraiser using accepted appraisal methodology. In lieu of an appraisal, the applicant may use the current and projected assessed values as determined by the local assessor. Values cannot be determined in any other manner. The value of the property after the proposed development is completed is also requested. Awarding Loans The HRA will award loans to projects that provide the highest return in public benefit for the public costs incurred and meet all of the statutory requirements. A total of 55 points can be received. In order to evaluate the applications for public benefits with respect to the costs incurred, the law specifies priorities that the HRA must consider. 1. The extent to which the existing property conditions threaten public safety. Maximum = 15 points 2. The length of vacancy of the property. Maximum = 5 points. 3. The development potential of the property. Maximum = 10 points 4. The proximity of the property to existing sufficient public infrastructure. Maximum = 5 points. 5. The applicant's financial condition and ability to repay the loan. Maximum = 15 points 6. Public benefits,including but not limited to, health, safety, environmental benefits,blight reduction, community stabilization, crime reduction and reduction of maintenance costs. Maximum = 5 points Financial Impact To support this program, the HRA would appropriate a predetermined amount of reserves from the HRA fund balance.As of July 30, 2015, the HRA has a fund balance available for Housing and Redevelopment purposes of approximately $1 million. Attachments • DRAFT HRA Blighted Properties & Forgivable Residential Loan program city of Rive7 Residential and Redevelopment Authority Blighted Properties Demolition & Forgivable Residential Loan Program Policy Guidelines & Application City of Elk River Housing and Redevelopment Authority 13065 Orono Parkway Elk River,MN 55330 763.635.1040 www.elkrivermn.gov P O W E R E 0 B Y Blighted Properties Demolition&Forgivable Residential Loan Program BLIGHTED PROPERTIES DEMOLITION & FORGIVABLE RESIDENTIAL LOAN PROGRAM APPLICATION TABLE OF CONTENTS Introduction Purpose/Background ii Funding Availability ii Deadlines/Requirements ii Eligible Applicants ii Eligible Program Costs ii Terms ii Forgiveness ii Required Appraisals or Assessments iii Awarding Loans iv Application Cover Page 1 Site Identification 2 Valuation 2 Maps and Site Features 2 History 3 Current Conditions and Development Potential 3 Cost Analysis 3 Sources and Uses of Funds (Budget Table) 4 Analysis of Loan Need 4 Financial Information 5 Blighted Properties Demolition&Forgivable Residential Loan Program BLIGHTED PROPERTIES DEMOLITION & FORGIVABLE RESIDENTIAL LOAN PROGRAM POLICY INTRODUCTION PURPOSE/BACKGROUND: The city of Elk River Housing and Redevelopment Authority(HRA) has developed a program to meet the untapped need for assistance with demolition and other redevelopment activities when either there is no current development plan or where future development visions are hindered by current blight. In some cases, despite a potential for future redevelopment, hazardous conditions or other public safety factors may become a community's immediate concern. Securing and maintaining vacant dilapidated structures is costly. Therefore, the Elk River HRA has created the Blighted Properties Demolition& Forgivable Residential Loan program to include loan funds for demolition activities when an imminent redevelopment opportunity does not currently exist. FUNDING AVAILABILITY: Available funding amounts vary per budget cycle. DEADLINES/REQUIREMENTS: The Blighted Properties Forgivable Residential Loan Program operates on a semi-annual application cycle. Applications are due February 1 and August 1 of each year. Completed applications and supporting documentation (3 copies)must be received by the city of Elk River by 4:30 p.m. on the due date to be considered for funding. An applicant may apply for more than one project,but an individual (separate) application must be completed for each site. NOTE: Electronic copies will not be accepted in place of paper. Please fill out the entire application. All applications must be complete upon submission in order to qualify for a loan. QUALIFYING PROJECTS: A project qualifies for a loan if the following conditions are met: 1. Upon completion of the project, the property and structures will be owner-occupied dwellings; 2. The structures constitute a threat to public safety because of inadequate maintenance, dilapidation, obsolescence, or abandonment; 3. The structures are not listed on the National Register of Historic Places; 4. Upon completion of the demolition, the HRA reasonably expects that the property will be improved and these improvements will result in economic development benefits to the municipality. ELIGIBLE APPLICANTS: Eligible applicants for this program must be the owner of the property at the time of the application or before disbursement of funds. ELIGIBLE PROGRAM COSTS: The Demolition Loan Program can pay up to 75,000 of the acquisition and demolition costs for a qualifying site. "Demolition costs"means the costs of demolition, destruction, removal, and clearance of all structures and other improvements on the project site, including interior remedial activities, and proper disposal thereof As used in this subdivision, "structure"has the meaning given it in section 116G.03, subdivision 11. Costs incurred before the loan is awarded are not eligible for payment. TERMS: Loans for acquisition and demolition costs may be made subject to the following terms and conditions: ii 1. The agreement to repay the loan may be a general obligation of the property owner,payable primarily from a dedicated source of revenue, or other security subject to review and approval by the HRA commission. 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 property owner shall make monthly 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 $75,000; 6. Loan proceeds shall be disbursed for eligible demolition costs as incurred or paid by the borrower and upon submission of invoices and other supporting documentation satisfactory to the commission; FORGIVENESS: The HRA may forgive the principal of the loan and interest accrued but unpaid thereon, if any, up to 50 percent of the original loan amount, not to exceed the costs of demolition, upon completion of the project. REQUIRED APPRAISALS OR ASSESSMENTS: Land appraisals of the current(as-is) and expected (pre-construction) value of the site are required so that the HRA can determine the fair market value and any business subsidy. Both appraisals must be done by an independent appraiser using accepted appraisal methodology. In lieu of an appraisal, the applicant may use the current and projected assessed values as determined by the local assessor. Values cannot be determined in any other manner. The value of the property after the proposed development is completed is also requested. iii AWARDING LOANS: The HRA will award loans to projects that provide the highest return in public benefits for the public costs incurred and meet all of the statutory requirements. In order to evaluate the applications for public benefits with respect to the costs incurred, the law specifies priorities that the HRA must consider. To fulfill this requirement of reviewing applications in an objective and fair manner, the following criteria have been assigned maximum point values in order to systematically award loans. All assigned scores will be relative to scores awarded to other applications. 1. The extent to which the existing property conditions threaten public safety. Maximum= 15 points 2. The length of vacancy of the property. Maximum= 5 points. 3. The development potential of the property. Maximum= 10 points 4. The proximity of the property to existing sufficient public infrastructure. Maximum= 5 points. 5. The applicant's financial condition and ability to repay the loan. Maximum= 15 points 5. Other public benefits, including but not limited to, health, safety, environmental benefits, blight reduction, community stabilization, crime reduction and reduction of maintenance costs. Maximum= 5 points iv Blighted Properties Demolition & Forgivable Residential Loan Application Cover Page Applicant: Applicant Address: City: Zip Code: Project Manager Contact(if different from above). Phone: - - E-mail: Mailing Address: Application Author Author's Phone& email Provide a written executive summary of the project, including the applicant's involvement in the project to date and how the applicant intends to manage the project should a loan be awarded. 1 I. SITE IDENTIFICATION AND HISTORY SITE INFORMATION 1. Name of Site: Site Address: City: Zip Code: Acreage of Site: Sq. Ft. of Site: 2. A. Does the applicant own the property? B. If not, at what point will the applicant acquire the property? C. What is the purchase price? Attach the Purchase Agreement or other evidence of the commitment of both parties. D. Is it anticipated that the property owner will retain ownership of the property once the demolition is complete? 3. Provide a legal description of the site. SITE VALUATION 4. What is the current appraised or assessed value of the Site? Attach the appraisal or assessor's value. 5. What is the projected appraised or assessed value after the demolition activities have been completed (prior to development)? Attach the appraisal or assessor's value. 6. What is the projected value after the proposed development is complete? MAPS AND SITE FEATURES 7. Attach an accurate and legible site and location map indicating the site showing locations of prominent and relevant site features such as buildings, retaining walls, etc. (NOTE: maps shall include property boundaries, a north arrow and bar scale). The map(s) should show the following: a) The current condition of the site including labeled structures and where and for what activities the HRA money will apply. b) The proposed potential development of the site including labeled structures if known. 8. Please provide current photographs of the site. Note: Photographs are a very important 2 part of review process. HISTORY 9. Please attach a synopsis on the history and general background of the site. This includes, but is not limited to, a description of the former and current uses of the site, as well as an explanation of what has occurred on the site, leading to its current dilapidated condition. CURRENT CONDITIONS 10. In order to qualify, structures on the property must have been vacant for at least one year. How many buildings are currently on site? Residential How many are occupied? If vacant, for how long? 11. Year building(s)was/were built: 12. Please provide evidence that the structures are not listed on the National Register of Historic Places. II. COST ANALYSIS 14. How much money are you seeking from the HRA? (May not exceed $75,000) 15. Fill out the budget table below indicating the uses, and amounts of all funds that will be used for eligible costs as defined. The table should indicate the total project budget non- incurred costs. 3 III. SOURCES AND USES OF FUNDS Demolition Uses of Funds for the Project(Budget Table) Use of Funds (Activity) Amount Date Activity Will Occur Acquisition Demolition Interior Abatement for Demolition Other: Total IV. ANALYSIS OF LOAN NEED 16. Describe how the structures on the property constitute a threat to public safety, are functionally obsolete, or are economically unfeasible to repair. 4 17. Describe how demolition of the site will reduce blight and improve the property's economic vitality, functionality and aesthetics. 18. Describe how close the property is to existing sufficient public infrastructure. 21. Describe how the community is stabilized, health is improved or any environmental benefits are achieved by the demolition of the site. V. FINANCIAL INFORMATION 22. Submit Historical Financial Statements: Financial statements should cover the past three years. Financial Statements should include: Tax Returns, Balance Sheets, Income Statements, Details on existing debt agreements, Statements of Changes in Financial Position, and Notes to the Financial Statements. If these Financial Statements are not audited, they must be signed and dated by an authorized officer of the owner. 23. The maximum term of the loan cannot exceed 15 years. What is your proposed term? 24. Are you issuing a note to repay the loan? 27. If you are issuing a note, what additional security will you be offering to secure the loan? 5