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3.0 HRSR 12-07-2015
Elk Request for Action River To Item Number Housing and Redevelopment Authority 3.0 Agenda Section Meeting Date Prepared by General Business December 7, 2015 Amanda Othoudt, EDD Item Description Reviewed by HRA Blighted Properties Residential program Cal Portner, City Administrator Reviewed by Action Requested Review and provide feedback on the Blighted Properties Forgivable Residential Loan program and policy. Background/Discussion After several discussions and workshop sessions over the past year, 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. At the September 29 special HRA workshop meeting, staff was directed to: 1. Revise the existing draft blighted properties residential forgivable loan program to include state statute language in the policy defining"blighted," 116G.03. 2. Research other HRA policies,where the HRA acquires, demos and markets properties for sale. 3. Research possible grant programs to acquire and demo properties. 4. Provide a count of the number of vacant,blighted properties in the city. The HRA has two programs currently in place are as follows: 1. CMHP Housing Rehabilitation Program 2. Blighted Properties Commercial/Industrial Forgivable loan program Additionally, the HRA approved at their October 5 meeting to submit a pre-application for grant funding in conjunction with the Small Cities Development Program. This program offers low interest and forgivable loans to owner occupied residential dwellings, and commercial properties. Internally, staff has identified 5 properties within the city limits that could be considered vacant, blighted properties, and 10 properties that are occupied blighted properties. Staff is seeking direction from the HRA on whether or not to develop a blighted residential properties demolition loan program. Financial Impact None Attachments rellEREB R1' NATURE • Revised DRAFT HRA Blighted Properties &Forgivable Residential Loan program • Disposition Policy and Procedure for Sale of Vacant Lots for Market Value—St. Paul Housing and Redevelopment Authority. • City of Minneapolis Real Estate Disposition Policy • League of MN Cities Purchase and Sale of Real Property • State of Minnesota Demolition Loan program )41., i1kkj ity River 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.elkrivcrmn.gov P 8 Y NATURE Blighted Properties Demolition&Forgivable Residential Loan Program BLIGHTED PROPERTIES DEMOLITION & FORGIVABLE RESIDENTIAL LOAN PROGRAM APPLICATION TABLE OF CONTENTS Introduction Purpose/Background 1 Funding Availability 1 Deadlines/Requirements 1 Application Fee 1 Qualifying Projects 1 Eligible Applicants 1 Eligible Program Costs 1 Terms 2 Forgiveness 2 Required Appraisal/Assessment 2 Awarding Loans 3 Application Cover Page 4 Site Identification 5 Valuation 5 Maps and Site Features 5 History 6 Current Conditions and Development Potential 6 Cost Analysis 6 Sources and Uses of Funds(Budget Table) 7 Analysis of Loan Need 7 Financial Information 8 Attachment Checklist 9 Application Review Worksheet 10 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. APPLICATION FEE:The applicant must submit an application fee of$180 at the time of submittal. 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 Formatted:Normal,Right 0.13",Space Before: 0 pt,After: 0 pt,Don't add space improved and these improvements will result in economic development benefits to the between paragraphs of the same style,Line municipality. spacing: single,Numbered+Level:1+ Numbering Style:1,2,3,...+Start at:1+ 5. The structure must be defined per,MN State Statue 117.025,Subdivision 7 as"structurally Alignment:Left+Aligned at: 0.13"+Indent substandard"."Structurally substandard"means a building; at: 0.38",Font Alignment:Auto,Pattern:Clear (1)that was inspected by the appropriate local government and cited for one or more ( Font:11 pt,Bold enforceable housing,maintenance,or building code violations; Formatted:Font:11 pt (Formatted:Font:12 pt,Font color:Auto 1 (2)in which the cited building code violations involve one or more of the following: (i)a roof and roof framing element; (ii)support walls,beams,and headers; (iii)foundation,footings,and subgrade conditions; (iv)light and ventilation; (v)fire protection,including egress; (vi)internal utilities,including electricity,gas,and water; (vii)flooring and flooring elements;or (viii)walls,insulation,and exterior envelope; 13)in which the cited housing,maintenance,or building code violations have not been remedied after two notices to cure the noncompliance;and (4)has uncured housing,maintenance,and building code violations,satisfaction of which would cost more than 50 percent of the estimated market value for the building, excluding land value,as determined under section 273.11 for property taxes payable in the year in which the condemnation is commenced. A local government is authorized to seek from a judge or magistrate an administrative warrant to gain access to inspect a specific building in a proposed development or redevelopment area upon showing of probable cause that a specific code violation has occurred and that the violation has not been cured,and that the owner has denied the local government access to the property.Items of evidence that may support a conclusion of probable cause may include recent fire or police inspections,housing inspection,exterior evidence of deterioration,or other similar reliable evidence of deterioration in the specific building. 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: 2 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 5 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 is eligible after 5 years of maintaining the property as an owner occupied dwelling.The applicant must submit a formal request for loan forgiveness to the HRA. 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. 3 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. 4 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. 5 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. 6 8. Please provide current photographs of the site. Note: Photographs are a very important 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 year, • {Formatted:Indent:Left: 0",Hanging: 031" ----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. 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. 8 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,and details on existing debt agreements.Credit report will be obtained by third party reporting on all three credit bureaus. 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. I 23. The maximum term of the loan cannot exceed k5-5years. What is your proposed term? 2'I. Are you issuing a note to repay the loan? 9 VI. ATTACHMENTS CHECK LIST Please attach the following: A) Residential Loan Program 1. Site Information 2. Site Valuation 3. Maps and Site Features 4. History 5. Current Conditions B) Cost Analysis C) Sources and Uses of Funds D) Analysis of Loan Need E) Financial Statements 1. Three Years of Personal Tax Returns 2. Three Years of Bank Statements 3. Details of Existing Debt Agreements 4. Credit Report H) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration I) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project J) Application Fee of$1¢50(Includes credit report processing fee) K)Inspection report by an appropriate local government which identifies that • (matted:Indent:First Ice: 0.5" the property is cited for one or more enforceable housing,maintenance,or building code violations, Formatted:Font:limes New Roman,12.5 pt, Font color:Gray-80% VI. AGREEMENT I/We certify that all information provided in this application is true and correct to the best of my/our knowledge. I/We authorize the City of Elk River Housing and Redevelopment Authority to check credit references and verify financial and other information. I/We agree to provide any additional information as may be requested by the HRA. 10 APPLICANT SIGNATURE BY DATE APPLICATION REVIEW WORKSHEET TO BE COMPLETED BY CITY STAFF In the event of multiple applicants,and limited funds dedicated to the program,the attached worksheet will be used to determine how the funds will be allocated. The project meets the criteria set forth in Section IV of the Blighted Properties Forgivable Residential Loan Policy.Check those which apply. ❑ Upon completion of the project,the property and structures will be owner-occupied dwellings;(50 points) ❑ The current primary structure constitutes a threat to public safety because of inadequate maintenance,dilapidation,obsolescence,or abandonment;(10 points) ❑ The structures are not listed on the National Register of Historic Places;(5 points) ❑ 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;(10 points) ❑ The project results in the sale and/or redevelopment of structurally substandard properties as determined by inspected by the appropriate local government and cited for one or more enforceable housing,maintenance,or building code violations.n liccn3cd maettral_.ng-n___;(5 points) Subtotal Section 1(maximum 80 points) 2. Consideration of Capacity. Check those which apply. Must meet all four to score 44-20 points. 0 points if any boxes are unchecked. ❑ Applicant included a realistic implementation/project schedule;(5 points) ❑ Applicant has the ability to administer and monitor project;(5 points) ❑ Applicant has the ability to conform to city,state and federal requirements;(5 points) 11 ❑ Applicant has credit score of 680 or above;(5 points) Subtotal Section 2(maximum 4-5-20 points) 3. Vacancy,Development Potential and Proximity to City Services ❑ The length of vacancy of the property; o j 1 year: 1 point o 2 years:2 points o 3 years:3 points o 4 years:4 points o 5+years:5 points ❑ The proximity of the property to existing city services(5 points) Subtotal Section 3(maximum 110 points) *minimum of 11 points must come from this section in order for project to be considered I Subtotal Sections 1-3(maximum 110 points) MSub-Total Points: of a possible 110 points. 12 Disposition Policy and Procedure for the Sale of Vacant Lots for Market Value by the Saint Paul Housing and Redevelopment Authority Purpose The purpose of the Vacant Lot Sales policy(VLS) is to establish a procedure for the Housing and Redevelopment Authority of the City of Saint Paul, Minnesota (the "HRA")to: • Sell HRA owned or city-owned vacant lots for their market value. • Ensure lots are marketed and proposals evaluated through a clear and equitable process. The purpose of the VLS is to sell unimproved vacant lots for their market value, with no additional allocation of HRA subsidy for property improvements.To be eligible for sale under the VLS,the parcel or contiguous group of parcels must be: • Smaller than 20,000 square feet, • Vacant lots, • Eligible for sale without restrictions or encumbrances by funding programs used to acquire, hold, or prepare the property for sale. Proposals that are not eligible under the VLS shall follow the Policy and Procedures outlined in the "Disposition Policy for HRA Real Estate" as amended by HRA Resolution 09-09/23-1. Objectives • To create a consistent and open sales process that provides equal access to opportunity. • To promote responsible development of buildable parcels to ensure Saint Paul can grow competitively. • To be fiscally responsible by reducing inventory held by the HRA and increasing Saint Paul's tax base. Policy The HRA will accept applications at least once annually for vacant lots it owns that are not under contract with a developer or intended for an HRA RFP/RFQ process. Properties released through this application process will be sold for their market value and will not be eligible for additional HRA subsidy.The market value of property will be established according to the Saint Paul HRA Property Valuation Policy, approved by HRA Resolution 14-1331. HRA property will be sold "as-is" with purchase price and closing costs delineated. Applications received will be considered and accepted according to the following priorities: • First priority:Sale for construction of commercial or residential structures that create jobs or housing opportunity and increase Saint Paul's tax base. • Second priority: Neighborhood uses that provide a public benefit, such as community gardens, pocket parks, public plazas, public art installations, or others. • Third priority: Sale as a vacant lot to adjacent property owners. • Fourth priority:Sale for the purpose of landbanking. Adopted by HRA Resolution 14-1331 on August 13, 2014 Procedures 1) Property posting: A list of properties eligible for sale are posted by the HRA and applications are accepted for a 30 day period.The property posting shall include lot address, parcel identification number, and market value based on the VLS market value policy at a minimum.The opportunity will be advertised on the HRA website and the early notification system (ENS)at a minimum. 2) Application review:Applicant submits a property application. Upon close of the 30 day application period, HRA staff will review applications received. When more than one eligible application is received for an address, applications will be awarded according to VLS priorities outlined above. • Application limit:An applicant may not be awarded more than 10 parcels or 50,000 square feet, whichever is less, through the VLS in an application cycle. • Contiguous parcels: If there are contiguous parcels offered through the VLS,the HRA will market all contiguous parcels as one opportunity. However, each individual parcel will count toward the application limit (i.e. 4 contiguous parcels would count as 4 parcels awarded, rather than 1 parcel). • Multiple proposals of equal priority: If there are multiple proposals received on the same property that are of equal priority,the HRA will conduct a lottery to determine application award. 3) Contract: When an application is accepted, HRA staff will send a contract to the Applicant. HRA staff require the following before taking further action: • Signed purchase agreement between Applicant and the HRA. • $500 non-refundable earnest money per accepted application payable to the HRA. 4) HRA Board Approval: HRA staff will seek HRA board approval for the acquisition. If approved,the HRA will execute the purchase agreement. If denied,the HRA will either review additional applications received until an HRA board approval is achieved, or the property will be released through a future application cycle. 5) Closing: Once the HRA board approves the application, a closing date will be scheduled. At the closing,the Applicant will be responsible to pay all closing costs and the acquisition price and will immediately take title to the property.The HRA expects closing to occur within 60 days of HRA board approval. 6) Property Development:After closing,the Applicant will be responsible to pay for all improvements and maintenance to the property.The HRA expects that proposed improvements, if any, will be complete within 24 months. 7) Failure to Perform: If Applicant fails to perform as outlined in the accepted application, no additional property may be acquired through the VLS until the default is cured. 8) MIS: Properties that have been offered through one application cycle may be listed on the MLS for a minimum of five days. Property listed on the MLS will be sold to the highest and best offer. Adopted by HRA Resolution 14-1331 on August 13, 2014 O0 INFORMATION MEMO LMINNESOTA Purchase and Sale of Real Property CITIES Understand the statutory authority of cities to acquire and dispose of real estate, including by sales, purchases, and alternatives such as gifts, leases, dedication, contract for deed, lease purchase and others. Be alert to common issues in transactions such as environmental considerations, deed restrictions, trust land,permissions to buy and sell, and more. RELEVANT LINKS: I. Acquisition of land Minn.Stat.§412.211. All statutory cities have authority to acquire real estate for various purposes. These cities may acquire real property either within or outside their corporate limits. Statutory cities may acquire real estate in any of the following ways: • Purchase. A city can acquire the title to land by simply buying it. • Gifts of land. A city can accept gifts of land. • Dedication. A city can require developers to dedicate land for parks, streets, and utility purposes as a condition of subdivision approval. • Devise.A city may receive real estate in a person's will. • Eminent domain(condemnation). This is a required sale of land to a Minn.Stat.§465.29. government entity for public use or public purpose. • Tax-Forfeiture. A city may acquire tax-forfeited land through outright purchase for the land's appraised value or may acquire the land at no cost if the city agrees to use the land for a public purpose. Most real estate is acquired through an outright purchase of all right and title to the land. This type of purchase is known as a purchase of fee simple rights and is represented by a deed document. However, cities can also acquire other types of interest in land using: Minn.Stat.e 412.221,sued. • Contract for deed. A city can purchase real property using a contract for z.see Part I-t-contracts for deed. deed if certain conditions are met. • Lease-purchase. A city can rent real estate with the option to buy. • Leases. A city can acquire an interest in real estate through rental agreements. • Easements. A city often acquires easements over property for such things as streets and utilities. Sometimes these easements are acquired by purchase or condemnation; other times the owner of the property may give them to the city. This material is provided as general information and is not a substitute for legal advice.Consult your attorney for advice concerning specific situations. 145 University Ave.West www.lmc.org 1/22/2015 Saint Paul,MN 55103-2044 (651)281-1200 or(800)925-1122 ©2015 All Rights Reserved RELEVANT LINKS: • Use Deed. When a city acquires tax-forfeited property at no cost,the use of the land will be restricted to specific public purposes specified on the deed document itself for a certain period of time. When the city ceases to use the land for the specified purposes,the land may revert to the state of Minnesota. Minn.Stat.§410.33. Home rule charter cities may have special requirements in their charters. These cities should check their charters for additional restrictions. However, if the charter is silent in this area, the city may follow the same rules that apply to statutory cities. A. Purchase Minn.Stat.§412.211. Statutory cities have the power to purchase real property within or outside of their corporate limits. Home rule charter cities generally have similar authority in their charters. Minn.Stat.§ 117.52. A city may have a responsibility to pay relocation costs to persons who are See Part I-E-Eminent domain. displaced from their homes, farms, or businesses as a result of the purchase. Minn.Stat.§282.01,subd.2. This law may apply even when the eminent domain process is not used to require the sale of the land. Most cities include a waiver in the final contract if these costs have been included in the price or if the sale is a negotiated one. Minn.Stat.§ 130.05,subd.3. If a city is developing an offer or counteroffer to purchase real property, it See Part III—I-Open Meeting Law. may close a meeting. B. Gifts of land to cities Minn.Stat.§465,03. Any city may accept a grant or devise real property and maintain such property for the purpose of its citizens in accordance with the terms prescribed by the donor. The city council must do the following in order to accept the land: • The council must pass a resolution by a two-thirds majority. This is a two-thirds vote of the entire council,not just the members who are present. • The resolution must express the terms of acceptance in detail. Minn.Stat.§465.03.Also Before accepting a grant of land,however, a city should carefully consider see Part III-A— Environmental. whether the conditions of the grant are ones it can follow. For example, a Housing and Redevelopment city could not agree to use the property for religious or sectarian purposes. Authority of City of South St. Paul v. united Stockyards Additionally, a city should investigate the history of the land to make sure Corp.,309 Minn.331,332, the land is not contaminated before accepting such a gift. 244 N.W.2d 275,276(1976). League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 2 RELEVANT LINKS: Minn.Stat.§500.20,subd. The Minnesota Supreme Court has held that the language in a deed that 2a. Hiller v.County of Anoka, donated property to a city and limited the use to municipal or park purposes 529 N.W.2d 426(Minn.Ct. automatically expired 30 years after the date of the conveyance. App.1995). C. Dedication Minn.Stat.§462.358,subd. Interest in land can also be acquired through dedication for parks, streets, 2b. See LMC information memo and utility purposes. This is most often done through a city's subdivision Subdivision Guide for Cities. regulations. The principle behind such dedications is to ensure that a new Minn.Stat.§462.358,subd. development will contain enough space for parks, streets, and utilities 2c(a). required as a result of the new development. Minn.Stat.§462.358,subd. There must be an essential nexus or logical connection between the land 2b(a). Minn.Stat.§462.358,subd. dedication and the purpose sought to be achieved by the dedication. The 2b(b). dedication must bear a"rough proportionality"to the need created by the proposed subdivision or development. The basis for calculating the amount to be dedicated must be established by ordinance. If a city adopts an ordinance requiring dedication, it must adopt a capital improvement budget and have a parks and open space plan or have a parks, trails, and open space component in its comprehensive plan. See Part III-C-Land held in Cities should keep in mind that land acquired through dedication is often trust. held in trust by the city for a specific purpose. This can sometimes restrict the city from using the land for another purpose or from selling it. 1. Parks, trails and recreational land Minn.Stat.§462.358,subd. Cities may acquire land through park dedication. A city may adopt 2b. subdivision regulations that require a reasonable amount of buildable land to be set aside for park, recreational facilities,playgrounds,trails,wetlands, and/or open space purposes when land subdivisions occur. Minn.Stat.§462.358,subd. In determining what amount of land should be dedicated,the regulations 2b. See LMC information memo, should give due consideration to the open space, recreational, or common Subdivision Guide for Cities. areas and facilities open to the public that the developer proposes to reserve for the subdivision. 2. Streets and rights of way Minn.Stat.§462.358,subd. Cities may adopt subdivision regulations that require a reasonable portion of 2b. the buildable land in a proposed subdivision be dedicated to the public for streets and roads. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 3 RELEVANT LINKS: 3. Utilities Minn.Stat.§462.358,subd. A city's subdivision regulations may also require a reasonable portion of the 2b. buildable land of a proposed subdivision be dedicated to the public for the following type of utilities: • Sewers. • Electric facilities. • Gas facilities. • Storm water drainage areas or ponds. • Other similar utilities and improvements. D. Devise Minn.Stat.§412.211.Minn. Sometimes people will leave real property to cities in their wills. Every city Stat.§465.03. has authority to accept real property that is devised to it. As with gifts of land, a city should be certain it could comply with any deed restrictions or conditions attached to the land. It is also important to consider the appropriate environmental aspects that could be a concern. A city should consult an attorney if real property is devised to it. E. Eminent domain (condemnation) Minn.Stat.§465.01.Minn. Cities can acquire real property or easements through eminent domain(also Stat.ch.117. known as condemnation). Essentially, eminent domain is a means to require Kelo v.City of New London, that an owner sell his or her land to a city. This procedure requires a formal 125 S.ct.2655(2005). court action, and a city must pay an owner for the value of the land or the Minn.Stat.§ 117.012,subd. damages to the land- if the city is taking only part of it, such as for an 2. easement. Minn.Stat.§ 117.025,subd. In Kelo v. City of New London,Conn.,the United States Supreme Court 11. held that taking property for economic development is a valid public purpose and that if a city seeks to exercise its power of eminent domain for economic development purposes, it should do so in conjunction with a well thought out economic development plan. In response to the Kelo decision,the Minnesota Legislature limited a city's power of eminent domain to a public use or public purpose. A public use or public purpose is defined as: • the possession, occupation, ownership, and enjoyment of the land by the general public, or by public agencies. • the creation or functioning of a public service corporation. • the mitigation of a blighted area,remediation of an environmentally contaminated area, reduction of abandoned property, or removal of public nuisances. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 4 RELEVANT LINKS: The public benefits of economic development, including an increase in tax base,tax revenues, employment, or general economic health, do not by themselves constitute a public use or public purpose. Minn.Stat.§315.42.City or State law limits the ability of cities to condemn land owned by religious Jordan v.Church of St John the Baptist,764 NW 2d 71 corporations without their consent. (Minn.Ct.App.2009). U.S.Const.Amend.V. A city can also be compelled to condemn land by a court order in an inverse Minn.Const.art.1§ 13. Lucas v.South Carolina condemnation action. A property owner can bring this claim when a city's Coastal Council,505 U.S. action has had the effect of depriving the property owner of some or all of 1003,112 S.Ct.2886(1992). Penn Cent. Transp.Co,v. their interest in the property. City of New York,438 U.S. 104,98 S.Ct.2646(1978). Wensmann Realty,Inc.v.City of Eagan,734 N.W.2d 623 (Minn.2007). See Handbook,Chapter 14. The eminent domain procedure is rather complex and will not be discussed in detail in this document. A city council that is considering using eminent domain to acquire land or an easement should consult with its city attorney for guidance. 1. Relocation assistance Both state and federal law protect property owners and tenants who are required to move because of eminent domain. Relocated persons must be paid relocation costs. 42 U.S.C.§§4601-4655. Federal law provides that the condemning authority must pay certain benefits to people who are displaced from their homes, farms, or businesses as a result of a federally funded project. Minn.Stat.§ 117.52. Minnesota law also requires the payment of relocation benefits when Minn.Stat.§ 117.52,subd. la. eminent domain is used, even if no federal funding is involved. The nature 49 C.F.R.§24.304. and amount of these benefits is the same as if federal funds were involved. For purposes of relocation benefits paid by a city under state law, federal law is applicable to the reimbursement of reestablishment expenses for nonresidential moves, except that a city must reimburse the displaced business for expenses actually incurred up to a maximum of$50,000. Minn.Stat.§ 117.52. Even if the sale of real estate to a city is negotiated, a city may have a responsibility to pay relocation costs. In such situations, most contracts include a specific waiver of additional relocation costs,because these costs are usually already included in the contract price, or specify the amount of the relocation benefits to be paid. League of Minnesota Cities Information Memo: 1/2 212 01 5 Purchase and Sale of Real Property Page 5 RELEVANT LINKS: 2. Land values The value of real estate is not always obvious. When considering a land purchase, a city may want to check the following: • The property's value for the most recent property tax levy. • The property's value for the most recent special assessment. • The value that the land and its buildings(if any) are insured for fire damage, etc. • Any recent occurrences that could affect the land's value, such as new neighboring land developments or contamination. See Part IV-Real estate In addition to considering these elements, a city should also have the land professionals. professionally appraised. (Section IV of this memo discusses appraisers). F. Tax Forfeiture Minn.Stat.§282.01,subd. 1. Land held by private parties may be forfeited to the state due to failure to pay property taxes. When this occurs, state law recognizes that some lands in public ownership should be retained for the benefit of the public while other lands should be returned to private ownership. Reflecting this understanding,tax-forfeited land is classified in two ways—either as conservation land or non-conservation land when it is obtained by the state. 1. Land classified as non-conservation land Cities may obtain tax-forfeited land classified as non-conservation land in two ways. Cities may: • Pay the appraised value of the land and receive full, clear title to the land. • Receive the land for free for certain specified uses with an agreement that the lands may only be used for a specified public use for a certain amount of time. Cities may obtain land for free land designated as non-conservation land for the following specified uses: • a road, or right-of-way for a road. • a park that is both available to, and accessible by, the public that contains amenities such as campgrounds,playgrounds, athletic fields, trails, or shelters. • trails for walking,bicycling, snowmobiling, or other recreational purposes, along with a reasonable amount of surrounding land maintained in its natural state. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 6 RELEVANT LINKS: • transit facilities for buses, light rail transit,commuter rail or passenger rail, including transit ways,park-and-ride lots,transit stations, maintenance and garage facilities, and other facilities related to a public transit system. • public beaches or boat launches. • public parking. • civic recreation or conference facilities. • public service facilities such as fire halls,police stations, lift stations, water towers, sanitation facilities,water treatment facilities, and administrative offices. Minn.Stat.*282.01,subd. When a city receives non-conservation land without payment, the city will lc. receive a specialized type of deed that specifies the uses for which the city may use the land for a certain period of time. This is known as a use deed. For example, if the city wishes to use the land for park land,the use deed will state that the land may only be used for park purposes. Minn.Stat.§282.01,subd. When the city has acquired land under a use deed, it must put the land to its Id.City of St Paul v State, 754 NW 2d 386(Minn.ct. specified use within three years or the land will revert to the state. If the city App.2008). later abandons the specified use before the time periods discussed below,the A.G.Op.425-c-11(May 27, 1964). land will also revert to the state. If the city abandons the public use for which it holds only a use deed, it may not convey the land to private parties. State statute allows cities to petition to change specified uses in a use deed. Cities that wish to covert public uses from one use to another(for example from park land to parking land)must seek approval for the change from the commissioner of revenue and the county board in which the land is located. If the change is approved,the city will be issued a new use deed stating the changed use. Minn.Stat.§282.01,subd. Non-conservation land obtained by a use deed on or after January 1, 2007, l d. may be acquired outright by the city after 15 years from the date of the conveyance when certain conditions are met. To acquire the property without use restriction,the city must: • make an application to the Commissioner of Revenue. • demonstrate that the property has been put to the use for which it was originally conveyed by use deed. • demonstrate that the city has no current intention to change the use for which the property was conveyed by the original use deed. • demonstrate that the county wherein the property is located has not filed any objection to the issuance of a new deed after 60 days notice. Non-conservation land obtained by a use deed before January 1,2007,may be released from the use restriction and possibility of reversion on January 1, 2022, if the county board wherein the property is located records a resolution requesting release on behalf of the city. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 7 RELEVANT LINKS: The county board may authorize the county treasurer to deduct the amount of the recording fees from future settlements of property taxes to the city. In the alternative,where county consent is not forthcoming, all non- conservation lands obtained by a use deed before January 1, 2007 are automatically released from the use restriction and reverter on the later of: • January 1,2015. • 30 years from the date the deed was acknowledged. • final resolution of any appeal to district court where a lis pendens has been recorded in the office of the county recorder or registrar of titles, prior to January 1, 2015 pursuant to Minn. Stat. 282.01. 2. Land classified as conservation land Minn.Stat.§282.01. Cities may obtain land designated as conservation land for free for the following specified uses: • creation or preservation of wetlands. • drainage or storage of storm water under a storm water management plan. • preservation, or restoration and preservation,of the land in its natural state. When a city receives land designated as conservation land for these purposes the deed must contain a restrictive covenant limiting the use of the land to one of these purposes for 30 years or until the property is reconveyed back to the state in trust. At any time, the governmental subdivision may reconvey the property to the state in trust for the taxing districts. G. Leases Minn.Stat.§412.211. Statutory cities may also acquire an interest in real estate through rental agreements. Although a city will not have ownership of the land in this case, it will have temporary possession of the land for use in accordance with the lease. Minn.Stat.§410.33. Home rule charter cities often have similar provisions in their charters. These cities should check their charters for authority. If the charter does not address the matter, a home rule city may use the authority given to statutory cities. Minn.Stat.§471.64,sued. I. Any city may enter into a contract with the United States government for lease, sale, or purchase of real property. Cities contracting under this statute need not follow any procedure that is normally required by charter provision or state statute. However, the United States government may have special procedures that must be followed. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 8 RELEVANT LINKS: See Part II-B-3 Liability Cities should carefully consider liability elements when leasing land and issues. buildings from or to another entity. These issues are discussed in more detail in a later section of this memo. H. Lease-purchase agreements Minn.Stat.§465.71. All cities have the power to use a lease-purchase agreement to lease real property with an option to buy. With a lease-purchase agreement,the title is retained by the seller or assigned to a third party as security for the purchase price. Minn.Stat.§465.71. If the amount of the contract is less than$1 million,this obligation is neither included in the calculation of net debt for the purpose of the bond laws nor shall it constitute debt under any other statute. Minn.Stat.§465.71.also Although a city is not required to use competitive bidding to enter into the see Part III-F-Competitive bidding and Part II-B— lease-purchase agreement, if it does so the amount of the contract must Leases• include the total of all the lease payments for the entire term of the lease. A city must have the right to terminate the lease purchase agreement at the end of any fiscal year during its term. Although not specifically required by statute, cities should include a non- appropriation clause in the contract. Such a clause allows a city to terminate the lease-purchase agreement if the council does not appropriate sufficient money to make the required payments. This ability may be important because if a city is required to make lease payments without regard to an annual(or biannual)appropriation, the lease might appear to be a debt of a city and it could be required to meet the statutory requirements for debt instruments. A city should consult with its attorney before entering into any lease- purchase agreement to ensure that all of the city's concerns have been addressed. I. Contracts for deed Minn.Stat.§412.221,sued. Statutory cities may purchase real property under a contract for deed. The 2. payments must be payable over a period not to exceed five years. Under the contract,the seller must be limited to the remedy of the recovery of the property in the case of nonpayment of all or part of the purchase price. Minn.Stat.§412.221,sung. If the purchase price of a contract for deed exceeds 0.24177 percent of the 2. estimated market value of the city,the city must do ALL of the following in order to purchase the land using a contract for deed: • Publish a resolution. The city must publish a council resolution in its official paper. The resolution must indicate that the city intends to purchase the property using a contract for deed. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 9 RELEVANT LINKS: • Wait for 10 days. The city cannot enter into the contract until at least 10 days after it publishes the council resolution. If a petition is submitted during these 10 days,there are additional requirements,which are discussed below. • Make the contract for deed. If no petitions are submitted,the council may enter the contract for deed. But if a petition is submitted,there are other additional requirements. Minn.Stat.§412.221,subd. A city has other responsibilities if it receives a valid petition from its citizens 2. during the 10 days after the resolution is published. A"valid"petition must meet ALL of the following criteria: • It must be a petition that asks for an election on whether the purchase should be made. • It must be signed by registered voters. • It must have at least the number of signatures that is equal to 10 percent of the total number of people who voted in the last regular city election. Also see LMC information A city must hold an election in order to purchase land using a contract for memo City Special Elections. deed if a valid petition is submitted asking for an election on whether the purchase should be made. A city cannot purchase the real estate using a contract for deed until a majority of the voters give it permission to do so. Minn.Stat.*410.33. Home rule charter cities should check their charters for authority to purchase land using a contract for deed. If the charter is silent on the matter,the city may use the authority of statutory cities. Minn.Stat.§507.235. A contract for deed must be recorded with the county recorder's or county registrar of title's office. It must be recorded within four months of being signed. The buyer is responsible for the filing. J. Easements A city can acquire an interest in land when it acquires an easement. A city can obtain easements in a variety of ways. The more common ways are: See LMC information memo • Dedication. Subdivision Guide.for Cities for more information on • Purchase. Minn.Stat. • Eminent domain, if the property owner does not want to relinquish the Minn.Stat.§412221. • p p Y q Minn.Stat.ch.117. easement. Minn.Stat.*465.03. • Gift. Also see LMC information Easements are often used for streets or for city public utilities, including memo,Acquisition and Maintenance of City Streets, sewer and water. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 10 RELEVANT LINKS: K. Use Deeds See Part I-F—Tax Forfeited When a city acquires tax-forfeited land without paying full value,the city is Lands. granted a use deed for the property. Use deeds specify the uses for which the city may use the land. If the city changes or abandons the use specified in the use deed,the land may revert to the state. The city may not sell land held by only a use deed to private parties. After using the property for the use specified in the use deed for a certain period of time,the city may obtain the property without restriction if it meets certain requirements. II. Disposition of land Minn.Stat.§412.211. Statutory cities may dispose of land that it does not hold in trust for a specified public use. Such disposition may be done in any of the following ways: • Sale. A city can sell land it does not need. • Lease. A city can rent land or building space that it no longer needs for city use. • Gifts or sale for nominal consideration. There are only a few limited situations under which a city may give away land or sell it for a nominal amount of money. A. Sale Minn.Stats.§412.211.Minn. Statutory cities have the power to sell land or buildings they no longer need Stat.§410.33. to anyone, other than elected officials. Home rule charter cities generally have similar authority in their charters. If a city's charter is silent with regard to the matter, it may use the authority that statutory cities have. See Part III—Common issues Generally, a city does not need to get permission from anyone in order to in land sales and purchases, sections B,C,F,and G. sell land. In some instances,however, a city may need to notify people or get approval prior to the sale. Sales of land are usually not required to use the competitive bidding process. Minn.Stat.§471.64. All cities have the power to contract with any of the following public entities and sell real property to it: • The United States. • Any United States agency. • Any state agency. • Any other political subdivision of Minnesota. See Part III-G-Getting Housing Redevelopment Authorities and Economic Development permission to buy or sell land. Authorities must hold a public hearing before selling most land. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 11 RELEVANT LINKS: Minn.Stat.§ 13D.05,subd. A public body may close a public meeting to determine the asking price for 3(c). real or personal property to be sold by the city,to review confidential or nonpublic appraisal data, and to consider offers or counteroffers for the sale of real property. B. Leases Contact the League research Cities often lease unneeded property and buildings to others for their use. department for sample community center use Sometimes these agreements are long-term leases. Other times it may be an policies• afternoon rental of a room in a community center. Many cities have adopted policies regarding the rental and use of their community centers. 1. Authority Minn.Stat.§412.211.Minn. Statutory cities have the power to lease land and buildings that are no longer Stat.§410.33. needed for city purposes. Home rule charter cities often have similar authority in their city charters. Home rule cities whose charters are silent on this matter may use the authority given for statutory cities. Anderson v.City of A city has the right to let outside parties use city buildings so long as the use Montevideo,137 Minn.179, 162 NW 1073(1917). does not interfere with the city's purposes. Penn-O-Tex Oil Co.v.City of A city can charge rent for the use of unneeded facilities because the income Minneapolis,207 Minn.307, 291 NW 131(1940). can"lighten the burden of the taxpayers." See Part III-G-Getting Housing Redevelopment Authorities and some Economic Development permission to buy or sell land. Authorities must hold a public hearing before leasing most land. Minn.Stat.§471.64. All cities can lease land to the United States, its agencies, any state agency, and other political subdivisions of the state. 2. Property Taxes Minn.Stat.§272.01,subds. Although city property is generally exempt from property taxes, it loses its 2(a)and(c). exemption when it is leased to a private individual, association, or organization that is in business to make a profit. Even though state law makes those who lease land from a city responsible for paying the property tax,cities should address the responsibility for paying the property taxes in the lease. 3. Liability issues See LMC information Whether a long-term lease or an afternoon rental, a city should consider the memos,LMCIT Model Community Center Rental liability exposure that it may have through the lease agreement. Ownership Documents;LMCIT of a building is one basis for possible liability if a person has a claim related Coverage Guide,Section III- T-2,Events sponsored by to the building. private groups. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 12 RELEVANT LINKS: If a city will be leasing a building to someone for an extended period of time, it should make sure to have a written lease that outlines the responsibilities of the parties. Similarly, if a city is renting a room or location to someone for a short term, such as a day or several hours, it should have a permit application procedure with rules regarding the use of the facility and a formal written agreement. The following elements should be considered in any written lease or rental agreement: • Repairs. The agreement should address who will be responsible for making repairs and who will pay for the cost of repairs. • Maintenance. The agreement should address who will maintain the building and the surrounding areas such as sidewalks and parking lots. • Supervision of activities. The agreement should address who will be responsible for supervising the activities that will be occurring in the building. • Cancellation. The agreement should allow the city to end the lease,with reasonable notice, if the building or land is needed for a public purpose. • Liability. The agreement should spell out how liability will be handled and include a defense and indemnification provision to reflect the relationship. The lessor should be required to defend the city for any claims against the city arising from rental of the building. • Insurance. The agreement should address whose insurance will cover the different risks involved. There are a number of different types of insurance that could be involved, including the following: • Property. This addresses damage to the building. • Personal property. This addresses damage to the contents of the building. • Liability. This addresses personal injuries. • Workers' compensation. This addresses injuries to employees. A city should require the renter to name it as an additional insured. Additionally, a city should require a copy of the certificate of insurance to verify this has been done and the amount of insurance coverage. 4. Policies on use of a city building See LMC information Cities often have policies regarding use of their buildings or facilities. memos,LMCIT Model Community Center Rental However, it is important that a policy not unlawfully discriminate against Documents;LMCIT Liability whom it allows to use the building or facility. The following are some Coverage Guide,Section III- T-2,Events sponsored by common areas of concern for use of a city building: private groups. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 13 RELEVANT LINKS: Lemon v.Kurtzman,403 U.S. • Religious use. A city should allow religious groups access to city 602,91 S.Ct.2125(1971). buildings on the same basis as other types of groups. If religious groups are not allowed to rent these facilities in the same manner as non- religious groups, a city could be accused of religious discrimination. Moreover, a city should also be careful not to support one religion over another(i.e., endorse a particular religion)by either having too many connections with a particular religious group or charging lower rent to a religious group than it does to another group. Also see LMC information • Commercial use. A city can allow a commercial organization to use a memo,Public Purpose Expenditures. city building that is not needed for city purposes. If a city lets commercial organizations use the building for free, such free use might constitute an unlawful"gift"by the city. Good News Club v.Milford • Free speech use. Once a city allows non-city use of a public building, it Central School,533 U.S.98, 121 S.Ct.2093(2001). cannot refuse to allow a group to use it because of the content of the speech or activity. 5 McQuillin Municipal • Resident and non-resident use. Generally speaking, a city may charge Corporations§19.25(3rd ed. Revised 1995). higher fees for non-residents to use city buildings and facilities so long as there is a rational basis to support the different treatment, such as that the residents also pay other taxes that support the facility. Some cities may give residents first choice in the use of the building. A complete ban of non-residents could be problematic if it has an unlawful discriminatory effect. • Financial responsibility. A city may use this as a basis for restricting use of a city building if the financial criteria are reasonably related to the city's costs or liabilities for the building or activity. For instance,the city may require a user to show proof of dram shop insurance if liquor will be served and refuse to rent the facility to a person who does not show proof of this insurance. C. Gifts or sale for nominal considerations Generally, a city may not give away land or sell it for a nominal amount. However,there are a few limited exceptions to this general rule. Minn.Stat.§465.025. Any city may give lands to the state if the land meets the following criteria: • The land is no longer needed for municipal purposes. • The land is owned by the city in fee simple. • The land is not restricted by a grant or dedication. Minn.Stat.§465.035. Any city, county, school district, or town may lease or convey land without consideration or for nominal consideration or any agreed upon consideration to any of the following: League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 14 RELEVANT LINKS: • The state of Minnesota. • Any governmental subdivision. • The United States. • Any federal government agency. • Any other public corporation. • The Minnesota state armory building. A.G.Op.469-a-9(May 5, The Attorney General has determined that a city was not permitted to give or 1967). lease land for a nominal consideration to a nonprofit corporation. Minn.Stat.§469.185. To encourage and promote industry and to provide employment Minn.Stat.§§ 116.1.993. opportunities for its citizens, cities may convey real property for nominal Minn.Stat.§116J.994. consideration. A city must own the land in fee simple and not otherwise be Minn.Stat.§ I16J.993,subd. restricted by grant or dedication. 3. Minn.Stat.§ 116J.994,subd. "Business subsidies," including the sale of real property, may not be 5. awarded until the grantor city has adopted eligibility criteria(including a specific wage floor) after a public hearing. Pursuant to statute, a conveyance for redevelopment,when the recipient's investment in the purchase of the site and site development is 70 percent or more of the assessor's current estimated market value, is not considered a business subsidy. Before granting a specific business subsidy that exceeds $100,000, a city must provide notice and hold a public hearing. A.G.Op.476-b-2(Mar.2, The Attorney General has determined that the"promotion of industry" 1961). requires more than the construction of a nonprofit athletic facility. Minn.Stat.§469.012,subs. A Housing and Redevelopment Authority(HRA)may give, sell,transfer, 1(e).Minn.Stat.§469.026. convey, or otherwise dispose of real property. This power,however, is subject to the provisions of another statute that deals with the acquisition of buildings for the purpose of low-rent housing. Ill. Common issues in land sales and purchases There are many things for cities to consider when buying or selling land. This section addresses some of the more common issues. A. Environmental If a city acquires real estate that is contaminated, it can end up being responsible for all or part of the cost of cleaning up the land. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 15 RELEVANT LINKS: Likewise, if a city buys a building that contains hazardous materials such as asbestos, it, as the owner, could have additional costs in order to remove the asbestos before the building is remodeled or torn down. 42 U.S.C.§§9601-9675. Both federal and state laws impose liability for the cost of cleaning contaminated property. The federal Comprehensive Environmental Response, Compensation and Liability Act(CERCLA) contains the statutes that deal with responsibility to clean up contaminated property—also known as the"Superfund"Act. These laws were later amended in the Superfund Amendments and Re-Authorization Act(SARA). Minn.Stat.ch. 115B. Minnesota's"Superfund" law is the Minnesota Environmental Response and Liability Act(MERLA). It gives the Minnesota Pollution Control Agency (MPCA)the power to clean up hazardous waste sites and to make responsible parties pay for the associated clean-up costs. Generally,both CERLA AND MERLA impose liability for clean-up costs of contaminated land upon the following people: • Owner/operator liability. Anyone who owned or operated a facility that dealt with a contaminant or hazardous substance can be held responsible for the cost of cleaning up the land if it is contaminated. • Generator liability. Anyone who owned or possessed a hazardous substance,pollutant, or contaminant and arranged for disposal or treatment can be held responsible for the cost of cleanup. • Transporter liability. Anyone who knew or should have known that waste accepted for transport contained a hazardous substance,pollutant, or contaminant and either selected the facility to which it was transported or disposed of it in a manner contrary to law can be held responsible for the cost of clean-up. Because of this possible responsibility, cities should check carefully to determine if land has been contaminated before acquisition. Although it is not always apparent that a piece of real estate has been polluted, a great deal can be learned by investigating the land's chain of title. A quick check of the county land records can reveal who has owned the land in the past. If a business once owned the land,the land may have been exposed to any chemicals that were used by the business. Similarly, a history of old railroad sites, gasoline stations,underground storage tanks, and electrical transformers can indicate a possibility of exposure to contamination. A city that will be acquiring land,whether by purchase or gift,may want to consider hiring a consultant to conduct an environmental property assessment. There are two types of assessments. The first, a Phase I Audit, consists of a site history and walk-over inspection. If any questions are raised as a result of the Phase I Audit, a Phase II audit can be arranged. A Phase II Audit consists of soil borings and other tests for chemicals. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 16 RELEVANT LINKS: Minn.Stat,§115B.03,subds. Although there are some limited circumstances under state law where a city 3-9. will not be held responsible for clean-up costs,these are exceptions to the general rule that an owner of property is responsible for clean-up costs. Further, an exemption from responsibility under state law does not mean a city would be exempt from these costs under federal law. A city should consult its attorney to verify any exemption from clean-up costs before acquiring title to any contaminated property. B. Deed restrictions Deed restrictions, also known as restrictive covenants, are conditions placed on the use of land by a previous owner. These restrictions are imposed on the future owners of the property and if a new owner does not meet the conditions, the previous owner can pursue court action to enforce the condition or recover the land. A city should carefully consider whether a deed restriction that the seller will impose is one with which the city could comply. A city should also investigate the county land records to see if there are any prior deed restrictions from previous owners before acquiring the property. Deed restrictions are usually uncovered during the title search. A.G.Op.425c-11(April 18, Deed restrictions generally run with the land. This means once a deed 2013). restriction is in place,the only person who can remove it is the person who imposed the restrictions. For instance, if a city wants to build a new city hall on property with a deed restriction that prohibits this type of use,the city must find the previous owner and request that the restriction be removed. While this may be possible if the city is buying the land from the person who imposed the deed restriction, it can be difficult if the person who created the restriction is not available or cannot be located. Likewise, if there are several deed restrictions that have been imposed by different owners, it may be difficult to track down all of the previous owners. Minn.Stat.ch.462. Cities do not enforce deed restrictions that exist on property owned by others. Generally, a deed restriction is a private contractual matter between the buyer and the seller of a piece of property. A.G.Op.469-a-15(Feb. 18, The Attorney General has determined that a city could not place a restrictive 1955). covenant in a deed to require that any home built on the land be of a certain value. C. Land held in trust It is somewhat unclear whether a city can sell land that it holds in trust for a specific purpose. The answer depends upon the specific facts of a given situation. A city should check with its attorney before attempting to sell any land held in trust. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 17 RELEVANT LINKS: Land that is held in trust is designated for a particular use.A common example is when land is given or dedicated to a city for park purposes. Generally, a city that holds park land in trust must use it for park purposes. If the city uses it for some other purpose,the previous owner can pursue a court action to regain ownership of the land or prohibit the city from using it for a different purpose. Minn.Stat.§505.01. Under Minnesota law, land that has been donated to the public on a plat that is recorded must be held in trust for its intended purpose. Larson v.Sando,508 N.W.2d Dedication occurs when a private party transfers land to a government entity 782(Minn.App.1993). for a particular purpose. Once land is formally dedicated with a condition, the government does not own the land in fee simple with the right to sell it. Headley v.City of Northfield, The general rule regarding dedications of land for park purposes is that the 35 N.W.2d 606(Minn.1949). Kronschnabel v.City of St. city holds the property in trust for the public and has no power to divert the Paul, 137 N.W.2d 200(Minn. land from the uses and purposes of the original dedication. 1965).Buck v.City of Winona,135 N.W.2d 190 (Minn.1965). In re Everett's Trust, 116 Neighboring property owners can also pursue court action to prohibit a city N.W.2a 601(Minn.1962). from using land for purposes other than those for which it was dedicated. In a 1962 decision, the Minnesota Supreme Court found that abutting property owners own appurtenant rights and have a right to enforce public uses of land dedicated to a specific public use. Buck v.City of Winona, 135 The Supreme Court also found that taxpayers have standing to object to a N.W.2d 190(Minn.1965). city's attempt to relinquish an easement for park purposes. In this case, however,the city had failed to comply with the requirements of its city charter. City ofzumbrota v.Strafford In a more recent decision,the Minnesota Supreme Court looked at a similar Western Emigration Co.,290 N.W.2d 621(Minn.1980). situation. In this instance, a city tried to sell dedicated land that it held in trust to a developer to build a senior citizen residence,but the land was dedicated for use as a public square. The abutting homeowners sought to stop the sale to the developer, claiming the development would make it impossible to maintain the public square and also result in the general public being excluded from the land. The court found the city could not sell land that it held in trust because the city had only such use of the property as was needed to fulfill the property's use as a public square. A.G.Op.59-a-40(June.15, The Attorney General has repeatedly found that cities that hold land in trust 1950).A.G.Op.59-a-40 (Nov.8,1955).A.G.op.59- that was dedicated for park purposes may not use the land for other purposes a-40(Dec.16,1947).A.G. or sell the land. Op.59-b-11 (Nov.20,1957). A.G.Op.469-a-I5(Jul.30, 1945).A.G.Op.469-a-15 (Nov.18,1948). League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 18 RELEVANT LINKS: D. Real estate contracts with a city official Minn.Stat.§ 15.054. A city is specifically prohibited from selling city land to one of its officials. Minn.Stat.§471.87-.89. See also LMC information Likewise, conflict of interest statutes do not appear to allow a city council to memo official Conflict of contract for the purchase land from one of its council members. Interest. Minn.Stat.§471.88,subd.5. One exception to the conflict of interest law is for contracts that are not Minn.Stats.§471.345,subd. 2.Also see Part I-H-Lease- required to be competitively bid. This exception applies only to contracts for purchase agreements. goods and services, and real estate does not fall into these categories. Therefore, this exception does not apply. A.G.Op.469-a-12(Aug.30, The attorney general has also concluded that cities may NOT contract to 1961).A.G.Op.90-a-1(Sep. 28,1955). purchase land from or sell land to their city council members. See Part I-E-Eminent If a city must acquire land from one of its council members, it may need to domain. exercise its power of eminent domain. Cities should contact the League and their city attorneys for further information on eminent domain. E. Title encumbrances A city should thoroughly investigate land it will be acquiring for any possible title encumbrances(such as liens, deed restrictions, special assessments,unpaid taxes, etc.). A title search or title opinion will usually uncover these encumbrances. F. Competitive bidding Minn.Stat.§471.345,subd. Real estate sales and purchases are not included in the definition of 2. "contract"for the purpose of the competitive bidding law. Accordingly, buying and selling real estate usually does not require competitive bidding. A.G.Op.469-a-15(Feb. 18, The Attorney General has repeatedly concluded that competitive bidding is 1955).A.G.Op.469-a-15 (Jul. 16,1947).A.G.op.59- not required for the sale of real property,but has not considered the issue of a-40(Nov. 19,1946).A.G. land purchases. Op.59-a-40(Nov.26,1946). A.G.Op.622-j-3(Jun.3, 1975).A.G.Op.59-b-14 (May 1,1967). Some home rule charters may have competitive bidding requirements for land transactions. These cities may need to follow these provisions in order to sell real property. Home rule charter cities should check their city charters for such requirements. G. Getting permission to buy or sell land Generally, a city does not have to get permission from anyone, including residents, in order to buy or sell land. However,there are a few exceptions to this general rule. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 19 RELEVANT LINKS: In some instances, a city may need to consider notifying people or getting approval before making the purchase. Such situations include the following: Minn.Stat.§475.58,subd.1. • Bond issues. If the city will be issuing general obligation bonds for the purchase, it must hold a special election to get permission to borrow money. Minn.Stat.§462.356,subd. • Comprehensive plans. If the city has a comprehensive plan,the planning 2. commission must review the transaction to determine if it is consistent with the plan. Minn.Stat.§412.221,subd. • Contracts for deed. If a statutory city will be buying land using a contract 2.Also see Part I-I- Contractsfordeed. for deed,it must publish a resolution indicating the intent to purchase land. If voters submit a petition,the city must hold a special election to get permission to buy the land. Minn.Stat.§469.029,subd. • Lease or sale of HRA, EDA, or Port Authority land. A Housing and 2.Minn.Stat.§469.065, subd.2.Minn.Stat.§ Redevelopment Authority(HRA), Economic Development Authority 469.105,subd.2. (EDA), and some Port Authorities must hold a public hearing before selling or leasing most land. • Charter provisions. Some city charters may contain provisions restricting the council's authority to buy or sell land. These situations are discussed in further detail below. 1. Bond issues Minn.Stat.§475.58,subd. 1. If the city will be issuing general obligation bonds to raise money for the land purchase, it must hold a special election to get permission from the voters. This permission gives the city the ability to borrow money for the purchase. Minn.Stat.§475.52,subds. 1 Any statutory city may issue revenue bonds or other obligations for the and 2. acquisition of buildings,parks,playgrounds, stadiums, sewers, streets, and sidewalks. Home rule charter cities may also issue bonds for these purposes if not restricted by their charters. Minn.Stat.§469.060,subds. There are some limited circumstances where a Port Authority may issue 1 and 5. bonds with prior council approval. See LMC information memo, The League has a research memo that discusses special elections in further City Special Elections. detail, as well as information on municipal bonds. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 20 RELEVANT LINKS: 2. Cities with comprehensive plans Minn.Stat.§462.356,subd. If a city has a comprehensive plan, it may not acquire or dispose of any 2. For more information on the property until the city's planning commission has reviewed the proposed role of the planning acquisition and reported on whether it will comply with the city's commission in purchase and sale of city property see the comprehensive plan. The planning commission's report must be in writing. LMC information memo Planning Commission Guide. Minn.Stat.§462.356,subd. If the planning commission fails to provide the written report within 45 2. days, the council need not wait any longer to make the purchase. The city council does not need to follow this requirement if it passes a resolution fording that the acquisition has no relationship to the comprehensive municipal plan. However, the resolution must be passed by a two-thirds vote of the council. 3. Contracts for deed See Part I-I-Contracts for If a city is purchasing land using a contract for deed and the cost will exceed deed. a certain amount, it must publish a resolution stating it will be making the purchase using a contract for deed. In addition, it must hold a special election to get permission from voters if a proper petition is submitted. Contracts for deed are discussed in detail at Part I-I. 4. Lease or sale of HRA, EDA, or Port Authority land Minn.Stat.§469.029,subd. A Housing and Redevelopment Authority(HRA), Economic Development 2.Minn.Stat.§469.065, subd.2.Minn.Stat.§ Authority(EDA), or Port Authority must hold a public hearing before 469.105,subd.2. selling or leasing most land. A city should also check an authority's bylaws and enabling resolutions for any additional requirements, such as prior council approval of land sales or other notice and hearing requirements. a. HRAs Minn.Stat.§469.029,subd. Land belonging to a Housing Redevelopment Authority(HRA)may be sold 2. or leased without public bidding,but only after holding a public hearing. Notice of the public hearing must be published at least once. The notice must be published at least 10 days,but not more than 30 days,before the hearing. b. EDAs Minn.Stat.§469.105,subds. An Economic Development Authority(EDA)may also sell its property after 2 and 3. holding a public hearing on the sale. The EDA must publish notice of the hearing in a newspaper with general circulation within the EDA's county and city. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 21 RELEVANT LINKS: The notice must be published at least 10 days,but no more than 20 days, before the hearing. The notice must include the following: • A description of the property to be sold. • The time and place of the hearing. • A statement allowing the public to see the terms and conditions of the sale at the EDA's office. • A statement that the EDA will meet to decide if the sale is advisable. c. Port Authorities Minn.Stat.§469.065,subd. A Port Authority may sell or convey property it owns within a port or t. industrial district,but must hold a public hearing on the proposed sale. The Port Authority must publish notice of the hearing in a newspaper with general circulation within the Port Authority's county and port district. Notice must be published at least 10,but no more than 20 days,before the hearing. The notice must include the following: Minn.Stat.§469.065,subd. • A description of the property to be sold. z. • The time and place of the hearing. • A statement allowing the public to see the terms and condition of the sale at the authority's office. • A statement that at the hearing the authority will meet to decide if the sale is advisable. Minn.Stat.§469.065,subd. A Port Authority must make a decision on whether the sale is advisable and 3. enter its decision on its records within 30 days of the hearing. A taxpayer may appeal the decision in district court by serving legal notice on the secretary of the Port Authority. Such service must occur within 20 days after the Port Authority enters its decision on its records. The only basis for appeal,however, is that the action of the Port Authority was arbitrary, capricious, or contrary to law. Minn.Stat.§469.065,subds. The terms and conditions of the sale of the property must include its 4 and 5. intended and allowable use. A Port Authority may require the buyer to file a security to ensure the property will be given that use. Minn.Stat.§469.065,subd. The purchaser must devote the property to its intended use or begin work on 5 and 6. improvements to the property to devote it to that use. If the purchaser fails to do this, a Port Authority may cancel the sale and the title of the property will return to the Port Authority. It may extend the period of time to comply with a condition if the buyer has good cause. Minn.Stat.§469.065,subd. A conveyance must not be made until the purchaser submits plans and 7. specifications to develop the property that is being sold. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 22 RELEVANT LINKS: A Port Authority must approve the plans and specifications in writing, and may require preparation of final plans and specifications before the hearing is held on the sale. A city should also check an authority's bylaws and enabling resolutions for any additional requirements, such as prior council approval of land sales or other notice and hearing requirements. d. Charter provisions See Handbook Chapter 4. Some city charters may contain provisions restricting the council's authority to buy or sell land. State law does not require bids or approval of the voters to sell land,but a charter may impose such restrictions. H. State deed tax Minn.Stat.§287.21,subd.1. The state deed tax applies to every grant, assignment,transfer, or other conveyance of land by deed. Cities are not exempt from this tax and are responsible for paying it to the same extent as any other individual making a land transaction. The tax must be paid before the county will record the property transfer. Minn.Stat.§287.24. The seller is usually responsible for paying the state deed tax, although sometimes the buyer may contractually agree to pay the tax in exchange for other concessions by the seller. I. The Open Meeting Law See LMC information memo The Minnesota open meeting law generally requires that all meetings of Meetings of City Councils. Minn.Stat.§ 13D.01. public bodies be open to the public. The open meeting law applies to all governing bodies of any school district,unorganized territory,county, city, town or other public body, and to any committee, sub-committee,board, department or commission of a public body. Minn.Stat.§13D.05,subd. Under the Open Meeting Law, a public body may close a meeting to: 3(c). determine the asking price for real or personal property to be sold by the public body; review confidential or protected nonpublic appraisal data; develop or consider offers or counteroffers for the purchase or sale of real or personal property. To close a meeting for these purposes,the following procedure should be done: • Before closing the meeting, the public body must state on the record the specific grounds for closing the meeting, describe the subject to be discussed, and identify the particular property that is the subject of the meeting. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 23 RELEVANT LINKS: • The meeting must be tape-recorded and the property must be identified on the tape. The recording must be preserved for eight years, and must be made available to the public after all property discussed at the meeting has been purchased or sold or after the public body has abandoned the purchase or sale. • A list of council members and all other persons present at the closed meeting must be made available to the public after the closed meeting. • The actual purchase or sale of the property must be approved at an open meeting, and the purchase or sale price is public data. IV. Real estate professionals Minn.Stat.§82.81.Minn. Real estate brokers, salespersons, and closing agents are licensed by the Stat.§82.641. state. Although there is no specific statutory authority for use of these professionals by cities, it is probably permissible for cities to retain such professionals if needed. Minn.Stat.§82B.03. Real estate appraisers are licensed by the state. Only a licensed appraiser is allowed to do real estate appraisals. When choosing an appraiser, a city should ask for references. In addition, a city should request that the appraiser supply the following information: • The appraiser's full name. • The appraiser's license number. • Whether the appraiser is exempt from licensing. • The length of time the appraiser has been in business. Call the Minnesota After getting the above information, a city should contact the Minnesota Department of Commerce at (651)296-6319 or 800-657- Department of Commerce. The Department of Commerce can verify the 3978. level at which the appraiser is licensed, and sometimes provide additional information on the appraiser's past performance. League of Minnesota Cities Information Memo: 1/22/2015 Purchase and Sale of Real Property Page 24 CPED REAL ESTATE DISPOSITION PROCEDURES DEVELOPMENT PROPERTY 1. Introduction a. Purpose and Scope These CPED Disposition Procedures set forth the process CPED Staff will follow in the disposition of City Development Property in accordance with the City of Minneapolis Real Estate Disposition Policy. These procedures will only apply to the disposition of City Development Property. b. Definitions For the purpose of these CPED Disposition Procedures the following terms shall have the following meanings: "Affiliate"shall mean any entity directly or indirectly controlling or controlled by or under direct or indirect common control with another entity and any purchaser of all or substantially all of the assets of such entity. For this purpose, "Control" shall mean the power to direct management and policies, directly or indirectly, whether through ownership of voting securities, by contract, or otherwise, and the term "Controlling" and "Controlled" shall have correlative meanings. "Buildable Lot"shall mean a lot that has enough frontage width and/or area to accommodate at least a single family home under the Zoning Ordinance after taking into consideration any variances or other relief available under the Zoning Ordinance. "Building Code"shall mean the building code for the City of Minneapolis as set forth in Minneapolis Code of Ordinances Chapter 85, as amended. "City"shall mean the City of Minneapolis, a Minnesota municipal corporation and home- rule charter city. "Comprehensive Plan"shall mean the current comprehensive municipal plan for the City. "CPED"shall mean the Minneapolis Department of Community Planning and Economic Development. "CPED Appraiser"shall mean the City Staff person with the title of"Appraiser" or a future equivalent position, whose duties are to provide appraisal services to the City in order to determine the Fair Reuse Value of Development Properties. "CPED Director"shall mean the Director of the Minneapolis Department of Community Planning and Economic Development (CPED), who, as the chief administrative officer of CPED, shall carry out the powers and duties of the director pursuant to Section 426.40 of the CPED Ordinance either directly or through a designee. "CPED Ordinance"shall mean Chapter 426 of the Minneapolis Code of Ordinances. "CPED Staff"shall mean any personnel or employees of CPED. "Development Property or Properties"shall mean all real property acquired or held by the City for development purposes, including fixtures, improvements, appurtenances, air rights and below grade property rights. Updated as of 10/6/04 1 "Developer"shall mean a Purchaser who has acquired an interest in a Development Property and is undertaking a redevelopment project pursuant to a Redevelopment Contract. "Disposition Policy"shall mean the City of Minneapolis Real Estate Disposition Policy. "Fair Market Value"shall mean the actual value in money for which a willing seller not compelled to sell will sell real property to a willing buyer not required to buy. "Fair Reuse Value"shall mean an estimated fair market value sale price or rental rate for Development Property based on the planned use of the real property as determined by the CPED Appraiser. "Holding Costs"shall mean those customary costs for property maintenance, including, but not limited to, lawn mowing, snow removal, security, trash removal, utilities, taxes and special assessments. "Land Inventory"shall mean all of the Development Properties that are available for disposition pursuant to this Disposition Policy. "Lease Rate"shall mean the lease or rental rate the City shall charge a Purchaser for the lease of Development Property. "Offer to Purchase"shall mean the CPED form offer to purchase to be submitted by a Purchaser to CPED Staff documenting the Purchaser's offer to purchase a Development Property. An Offer to Purchase shall not constitute a legally binding acceptance of a Purchaser's offer. Only a fully executed Redevelopment Contract, as authorized by the City Council and law, shall constitute a legally binding acceptance of a Purchaser's offer. "Project Coordinator"shall mean the CPED staff person assigned by a CPED manager to coordinate a development project. "Property"shall have the same meaning as Development Property has herein, and may be used interchangeably with Development Property. "Purchaser"shall mean any person, corporation or other legal entity who: (i) makes an offer to purchase, lease or acquire an interest in Development Property; or(ii) has entered into a Redevelopment Contract for the purchase, lease or other acquisition of an interest in Development Property; or(iii) has actually purchased, leased or otherwise acquired an interest in Development Property. "Purchase Price"shall mean the actual purchase price the Purchaser shall pay to acquire the Development Property as required and approved by the City Council. "Recapture Agreement"shall mean the agreement between the City and the Purchaser evidencing any Writedown given the Purchaser and providing for the recapture by the City of all or a portion of the Writedown at a future date, not to exceed twenty (20)years from the date of conveyance of the Development Property. The Recapture Agreement shall be evidenced by a promissory note and secured by a mortgage or other collateral acceptable to the CPED Director. "Redevelopment Contract"shall mean the contract between the City and the Purchaser for the redevelopment of Development Property pursuant to the Disposition Policy. Updated as of 10/6/04 2 "Redevelopment Law"shall mean Minnesota Statutes, Section 469.001 through 469.047, as amended. "Soil Correction"shall mean the site and engineering work necessary and required to clean, clear, remove, mitigate and/or remediate Unsuitable Soils from Development Property. "Soil Correction Escrow Agreement"shall mean an agreement between the City and a Purchaser for the escrow of some or all of the net Purchase Price proceeds to reimburse the Purchaser for certain Soil Correction costs as agreed to by the City and approved by the CPED Director or the City Council. "State"shall mean the State of Minnesota. "Unsuitable Soils"shall mean abnormal, geotechnically substandard or contaminated soils, which, in CPED Staff's professional opinion, qualify for soil correction. Such abnormal, substandard or contaminated soils shall include, but are not limited to, soils that contain substantive amounts of loose and/or organic soils; demolition debris and rubble; abandoned building foundations, pilings, underground utilities, and storage tanks; illegally dumped and buried materials; and hazardous substances, hazardous wastes, pollutants or contaminants as those terms are defined under any federal, state or local statute, ordinance, code or regulation. "Writedown"shall mean the amount by which the Purchase Price is reduced below the Fair Reuse Value based on public purpose consideration rather than Fair Market Value valuation methods. "Writeoff"shall mean the difference between the City's actual cost to assemble the Development Property for disposition, which costs include land acquisition, demolition and relocation costs, and the Fair Reuse Value. "Zoning Ordinance"shall mean Title 20 of the Minneapolis Code of Ordinances. 2. Pre-Disposition Activities a. Disposition for Redevelopment or other Statutory Purposes The City can only dispose of real property as permitted by law. Generally, Development Property will be disposed of under the authority of Minnesota Statutes Chapter 469 which authorizes the sale or lease of Development Property in accordance with a City-adopted redevelopment plan or, with or without accordance to a redevelopment plan, for blight removal or for housing purposes to a nonprofit housing corporation or to persons of low and moderate income. There are a number of other disposition authorities available to the City. If a land sale does not fall within the foregoing categories, contact the assigned attorney to identify the proper authority. The City will not convey Development Property for land banking or speculation purposes. b. Property Investigation The CPED Director shall assign each Development Property to a division within CPED based on intended use or geographic area and a Project Coordinator shall be assigned to handle disposition. CPED Staff should evaluate some or all of the following issues and their effect on disposition. The Project Coordinator will need to determine what additional information is needed on a case-by-case basis. If there are costs associated with a particular issue, the Project Coordinator will need to identify funds for such activities. Updated as of 10/6/04 3 i. Establishing Reuse and Fair Reuse Value. Prior to disposition of Development Properties, the reuse and Fair Reuse Value should have been established for each Development Property. The Fair Reuse Value shall be periodically reviewed and may be increased or decreased based on appropriate valuation methods as approved by the CPED Appraiser. Use the linked form to contact the CPED Appraiser to review the established reuse and Fair Reuse Value and determine whether there is a need for an update or independent appraisal. Request for Reuse Value Opinion. If a formal appraisal is required, fill out the linked form and provide it to the CPED Appraiser. Request for Appraisal ii. Buildability Determination. Working with the Planning Division, the Project Coordinator should determine whether the Development Property is a "Buildable Lot" under the Zoning Ordinance. If the Development Property is a "Buildable Lot" or could be a "Buildable Lot," CPED Staff must first attempt to sell such property for development purposes. iii. Survey. While it is unlikely that the City needs to incur the expense of commissioning a Survey for a land sale, the Project Coordinator should review any available survey to identify potential title problems. If there is a need to order a new survey, use this form to contact the CPED engineering staff: Request for Engineering Services iv. Environmental Review. Environmental investigation of property should be conducted prior to CPED acquisition. The Project Coordinator should contact the CPED engineering staff to obtain any existing environmental reports or to order any updates or additional testing. If any updating or additional testing is necessary, use this form to contact the CPED Engineering Staff: Request for Engineering Services v. Title Investigation. Title insurance or other evidence of title status may have been obtained upon acquisition of the property. Upon disposition, the City will be required, in most cases, to provide title evidence that demonstrates that the City has marketable title to the Development Property. If title is not clear, the Project Coordinator shall formulate a plan regarding title clearance prior to disposition. Title evidence may be in the form of an abstract of title and owner's registration certificate or, more commonly, through a commitment for title insurance. Although the City will usually order and pay the cost of a title commitment, the purchaser is responsible for purchasing a Title Insurance Policy(except in the case of a Home Ownership Works home sale where it is the industry standard to provide a Title Insurance Policy if an abstract is not available). The Project Coordinator should contact the CPED real estate staff to obtain any title records. Generally, unless the City already has title work from a particular title insurance company, it will defer to the purchaser's choice of title insurance companies. vi. Planning Commission Review. If a Development Property is not being disposed of in accordance with a Planning Commission reviewed Redevelopment Plan, per state law, the Planning Commission must review the land sale for consistency with the City's Comprehensive Plan prior to City Council approval of such land sale unless the City Council adopts a resolution by two-thirds vote finding that the proposed disposition has no relationship to the Comprehensive Plan. A waiver has been granted from this requirement for dispositions of non-buildable parcels where a "buildable parcel" is a parcel of real property that has enough frontage width and/or area either by itself or when combined with other adjacent City-owned property to accommodate at least a single family home under the Minneapolis Updated as of 10/6/04 4 zoning ordinances after taking into consideration any variances or other relief available under such zoning ordinances. If Planning Commission review of the land sale is necessary, contact the CPED Planning Staff to initiate City Planning Commission Review under Minnesota Statutes Section 462.356, subd. 2. vii. Tax-Exempt Financing Review. Determine whether the property was acquired or improved using tax-exempt bond proceeds to determine whether federal tax rules apply. The CPED Senior Development Financial Analyst or the Finance Department's Director of Capital & Debt Management may be helpful in this regard. c. Marketing Options All Properties in the Land Inventory shall be offered for sale or lease as permitted by State law to Purchasers for permitted redevelopment or public use purposes. CPED may offer Development Properties for sale or lease by the following methods. The Project Coordinator should make a recommendation to the CPED Director as to the preferred marketing option and whether an interdepartmental working team should be established for the disposition. The CPED Director shall make the determination on method of disposition. i. Public Bids. Where the property is offered either: (i)at public auction, with an announced minimum bid; or(ii) by sealed bids, which must include the date and time by which all bids must be received and bids received after this date will be rejected; the address where the bids should be submitted; and the date, time and location for the opening and reading of the bids. CPED shall advertise Development Properties offered for sale or lease by Public Bid through a public announcement advertised in "Finance and Commerce," or the "Minneapolis Star Tribune" and may also advertise such offers in national publications, trade journals, community newspapers and other appropriate communication venues, including direct mailings or invitations to selected prospective Purchasers. All offers advertised in "Finance and Commerce" or the "Minneapolis Star Tribune" shall be advertised no less than once a week for two (2) consecutive weeks. All advertised offers may be advertised one (1) or more times as the Project Coordinator deems appropriate. If no bids are received after the expiration of a Public Bid submission deadline date, the Project Coordinator may re-advertise the Public Bid and extend the submission deadline date. If one (1)or more bids are received, the City must first formally reject all bids before re-advertising the Public Bid. ii. Request for Proposals. Where a request for proposals (the "RFP") is prepared inviting Purchasers to submit proposals for the purchase and redevelopment of the Property. If the Project Coordinator is recommending an RFP process for disposition, the recommendation to the CPED Director should contain the following: (i)why an RFP is appropriate; (ii) the development objectives for the site; (ii) a recommended composition for an interdepartmental/stakeholder review committee (e.g., Planning, HPC, Public Works, Park Board, Finance, Council Member, neighborhood organization). At a minimum, the Project Coordinator must contact the appropriate Community Planner at the time an RFP is prepared to obtain Planning Division comments on the RFP; (iii) the recommended role for the interdepartmental/stakeholder review committee (e.g., RFP preparation and/or evaluation of proposals); (iv) an RFP distribution strategy; and (v) budget implications and recommendations. Neither Permanent Review Committee review nor City Council authorization is necessary before issuing an RFP. Updated as of 10/6/04 5 The standard form of Development RFP for Project Coordinators to use and modify for use in real estate disposition solicitations is linked: RFP Template - Development Many portions of the standard form RFP are required. If the Project Coordinator intends to delete any portion of the standard form, the assigned attorney should be contacted. Project-specific additions to the standard form are encouraged. Contact the Communications Department for support to put the RFP on the web site and/or provide graphic assistance. These procedures do not require or prohibit RFQs. CPED shall advertise Development Properties offered for sale or lease by RFP's through a public announcement advertised in "Finance and Commerce," or the "Minneapolis Star Tribune" and may also advertise such offers in national publications, trade journals, community newspapers and other appropriate communication venues, including direct mailings or invitations to selected prospective Purchasers. All offers advertised in "Finance and Commerce" or the "Minneapolis Star Tribune" shall be advertised no less than once a week for two (2) consecutive weeks. All other advertised offers may be advertised one (1)or more times as the Project Coordinator deems appropriate. If no proposals are received after the expiration of a RFP submission deadline date, the Project Coordinator may re-advertise the Public Bid or RFP and extend the submission deadline date. If one (1)or more proposals are received, the City must first formally reject all proposals before re-advertising the RFP. iii. In-Fill Residential Lot Sales. Where a lot is offered on the open market for sale for residential purposes of a single family or duplex. Such lot should be advertised no less than once a week for four(4) consecutive weeks. Advertisements are to run in the "Star Tribune" Minneapolis Edition on the 1st and 3rd Sunday of the advertisement period and in "Finance and Commerce" on the 2nd and 4th Tuesday of the advertisement period. The Project Coordinator should also notify the 25 most likely builders to submit offers directly by mail. If no valid and credible Offers to Purchase are received after the expiration of an advertised submission deadline date, the Project Coordinator may either post the lot as available for sale on the CPED web site's lot list or re-advertise the lot and extend the submission deadline date. If one (1)or more valid and credible Offers to Purchase are received, the City must first formally reject all Offers to Purchase before re-advertising the Lot. All Home Ownership Works (HOW) properties are sold through Exclusive Listing Agreements with a CPED-identified broker and are not advertised as described above. iv. Direct Sale. Where a Purchaser directly enters into negotiations with CPED for the purchase and redevelopment of a specific Property. Upon receipt of a formal expression of interest from a potential purchaser, the Project Coordinator should obtain approval from the CPED Director to pursue negotiations. A Direct Sale may not occur where (i) other Purchasers have submitted a valid and credible Offer to Purchase to CPED for the purchase and redevelopment of a specific Property, (ii) the Property is already being offered for disposition by public bidding, RFP or advertisement as an in-fill residential lot sale, (iii) the Property is unavailable for disposition because it has been approved for sale to another Purchaser or is part of an existing or proposed redevelopment project, or(iv) CPED determines that the proposed Direct Sale offer is inconsistent with the Disposition Policy or is not in Updated as of 10/6/04 6 the best interest of the City. Offers to Purchase that are received subsequent to CPED's submission of an Offer to the appropriate neighborhood group for formal review and comment will not be considered as preventing a direct sale. v. Broker Sale. Where commercial/industrial Development Properties are offered for sale or lease through the CPED Commercial/Industrial Broker Participation Program. If a Property is identified as appropriate to be offered through the Broker Participation Program, contact the CPED staff person in charge of the program to have the Property registered. The staff person in charge of the Program shall, on a regular basis, recommend properties for inclusion in the Program to the CPED Director through a Director's report. No properties may be included in the program without an approved Director's report authorizing inclusion. Residential properties are not appropriate for the Program. vi. Pass-Thru Conduit Sale. Where the City agrees to assist a Purchaser wanting to buy property owned by another governmental entity, such as tax-forfeited property from Hennepin County (the "County") or excess land from the Minnesota Department of Transportation ("MnDOT"), and the governmental entity can only sell the property first to the City as a conduit Purchaser, and then only the City, as a conduit seller, can convey the property to the Purchaser. The property owned by another governmental entity must not be part of a City project or program. The Purchaser shall pay all costs of transfer and conveyance and the City may charge the Purchaser an administrative fee of up to ten percent(10%) of the Purchase Price to assist in a Pass-Thru Conduit Sale. vii. Public Entity Conveyance. Where the City agrees to convey a Property by dedication, gift, exchange or sale to another governmental or public Purchaser, and the Property is to be devoted to public uses other than redevelopment purposes. viii. Certain Development Properties to be Made Available for Low or Moderate Income Housing Development Pursuant to M.S. Section 469.029, subdivision 9. Each year, CPED Staff shall list all Development Properties, including air rights, to determine what Properties are in excess of the City's foreseeable needs. These excess Properties shall be included in an Excess Land Inventory Report prepared by CPED Staff and made available to the public on the City's WEB Site. 3. CPED Staff Review And Evaluation Of Redevelopment Proposals And Offers a. Offer to Purchase All Purchasers who want to acquire Development Property must submit an Offer to Purchase form. CPED Staff should obtain a completed Offer to Purchase as early as possible in the process, but in any event, prior to the preparation of the City Council report authorizing the land sale. For in-fill residential lot sales, an Offer to Purchase must be received prior to the advertised submission deadline to be considered. Purchaser's offer is subject to CPED Staff review and evaluation, neighborhood review, a public hearing, City Council approval and the negotiation and full execution of a Redevelopment Contract. Offer to Purchase forms are available on the CPED WEB site or through this link. (Lee, please add a link to the Offer to Purchase forms). b. Determining Purchase Price, Lease Rate and Writedowns In conjunction with the review and evaluation of a completed Offer to Purchase, Project Coordinator and the Purchaser shall negotiate the Purchase Price, Lease Rate or Writedown for the proposed redevelopment in accordance with the following guidelines: Updated as of 10/6/04 7 i. Purchase Price. CPED Staff shall not recommend a Purchase Price less than the Fair Reuse Value for the proposed redevelopment, unless a Writedown has been deemed appropriate as described in Section (B)(3) below. The Fair Reuse Value may be decreased or increased based on appropriate Fair Market Value valuation methods, such as appraisals or assessor data, which may be negotiated between CPED Staff and the Purchaser. Any such adjustments to the Fair Reuse Value shall be approved by the CPED Appraiser. Contact the CPED Appraiser using the linked form: Request for Reuse Value Opinion ii. Lease Rate. Development Properties must be leased at a rental rate that is based upon the Fair Reuse Value for the specific use for which the Development Property is being leased. The Fair Reuse Value Lease Rate may be reduced in an amount equal to the actual cost of: (i) any non-tenant improvements made by a tenant that permanently improve the Development Property and are customarily the responsibility of the landlord; or(ii) any customary landlord costs or expenses the tenant agrees to assume. Any Lease Rate reduction may not reduce the monthly Lease Rate by more than fifty percent(50%). iii. Writedown. CPED Staff may recommend that a Writedown be given to the Purchaser for a redevelopment proposal where there is a valid public purpose pursuant to the Redevelopment Law, and where the Writedown is necessary for the financial viability of the redevelopment proposal. The amount of the Writedown shall be equal to the value of the public benefit to be received as approved by the City Council. In no event shall a Writedown reduce the Purchase Price or Lease Rate to less than one dollar($1.00). The City may sell, transfer or lease any of its Properties to another governmental entity for any public use by gift or exchange or at any Writedown. CPED Staff shall state the basis for the determination of the Purchase Price or Lease Rate and any Writedown that will be recommended for the redevelopment proposal in the City Council Report regarding the redevelopment proposal and offer. c. Soil Correction Allowance and Escrow i. Determining the Soil Correction Allowance. Where it can be demonstrated that Development Property contains substantial amounts of Unsuitable Soils, CPED Staff may recommend for CPED Director or City Council approval that the Purchaser be given a Soil Correction allowance. Upon such demonstration, CPED Staff shall prepare a Soil Correction Report describing, to the extent the information is available: (i)the nature and extent of the Unsuitable Soils; (ii) the soil tests and other site investigations evidencing the Unsuitable Soils; (iii)the Soil Correction strategy and methods; (iv)the actual or estimated cost of the Soil Correction as evidenced by invoices, bids or estimates; and (v)the recommended amount of the Soil Correction allowance, which allowance amount, along with any Writedowns and other City deductible costs, shall not reduce the Purchase Price to less than one dollar($1.00). CPED Staff shall submit the Soil Correction Report for approval by the CPED Director if the Soil Correction allowance is $100,000.00 or less, or to the City Council for approval if the Soil Correction allowance exceeds $100,000. The Soil Correction allowance shall not exceed the net Purchase Price. The Soil Correction report should be made a part of the Land Sale Report if the information is available at the time of preparation of that report. If the Purchase Price has already been adjusted for known Unsuitable Soils and is being sold on an "as is" basis, the Purchaser shall not be eligible for a Soil Correction allowance. Updated as of 10/6/04 8 ii. Special Soil Correction Evaluation Criteria. To be eligible for a Soil Correction allowance the extent of the Unsuitable Soils must fall within the following threshold criteria: (i)the soil correction amounts must be substantial; (ii)the soils must not be the surface residue left over from demolition work; (iii)the soils must be located at an excavation depth greater than that required for frost footings; (iv)the soils must be incapable of supporting moderately loaded footings with earthwork required to strip organic surface materials, clearing and grubbing of trees and brush with grading and compaction; (v)the topography of the site must not require cutting and filling to adapt contours of the site to the design of the building; and (vi) the extent and cost of the site preparation work must exceed the extent and costs of such work that is customarily and typically required for projects of similar size and nature. For commercial or industrial sites the following additional criteria apply: (vii) the Soil Correction allowance shall only apply to soils within the building footprint, and (viii) Soil Correction costs for soils under parking lots are specifically prohibited from inclusion in the Soil Correction allowance. If there are design options available for construction of the project that could minimize the need for and costs of Soil Correction, these design options should be considered and undertaken if they are feasible and do not substantially increase development costs. If the Purchaser does not consider these design options or unreasonably disagrees with CPED Staff on the use of these design options, the Purchaser shall not receive a Soil Correction allowance. iii. Soil Correction Escrow Agreement. If approved by the CPED Director or City Council as required herein, the City and the Purchaser shall, at the time of closing on the sale, enter into a Soil Correction Escrow Agreement to pay for Soil Correction costs, not to exceed the amount of the Soil Correction allowance The Soil Correction Escrow allowance shall only be used to reimburse the Purchaser for the actual costs of Soil Correction as authorized by the Soil Correction Escrow Agreement and evidenced by invoices or billings for Soil Correction costs and inspections and approved by CPED Staff. If the total amount of the actual Soil Correction costs is less than the amount of the approved Soil Correction allowance, the remaining balance in the Soil Correction escrow account shall be retained by the City as City proceeds. If the total amount of the actual Soil Correction costs exceeds the amount of the approved Soil Correction allowance, those Soil Correction costs in excess of the Soil Correction allowance shall be the sole responsibility of the Purchaser, unless funds for such purpose are specifically approved by the City Council. If the amount of the Soil Correction costs have been agreed to be paid and have been paid for by the Purchaser prior to the conveyance of the Development Property, the Soil Correction allowance shall be deducted from the Purchase Price at the closing. iv. After Conveyance Soil Correction Allowance. If after the conveyance of the Development Property to a Purchaser it is discovered that the Development Property contains Unsuitable Soils, which, in CPED Staff's professional opinion, would have qualified for a Soil Correction allowance as permitted by this Section III(C)(4), then, upon a written request from the Purchaser, Project Coordinator shall prepare a Soil Correction Report for approval by the CPED Director or the City Council as required herein. If the CPED Director or City Council approves a Soil Correction allowance as required herein, the City and the Purchaser shall promptly enter into a Soil Correction Escrow Agreement as described in this Section III(C)(4), for the reimbursement of Soil Correction costs. Updated as of 10/6/04 9 Upon the after conveyance discovery of Unsuitable Soils, the Purchaser shall stop work immediately on the project and notify appropriate Project Coordinator or his/her manager, if Project Coordinator is unavailable. CPED Staff shall then consult with CPED engineering staff to evaluate the Purchaser's request for a Soil Correction allowance as required in this Section III(C)(4)and the ability of the Purchaser to continue work. Failure to stop work and notify CPED Staff shall make the Purchaser ineligible to receive a Soil Correction allowance. The Purchaser shall not be eligible for a Soil Correction allowance where a building has already been erected over the area where the Unsuitable Soils are claimed to have been located or after the City has issued a certificate of completion for the redevelopment project. d. Questions to be Addressed CPED Staff shall review and evaluate all redevelopment proposals and Offers to Purchase Development Properties based on the information provided in a Purchaser's proposal and Offer to Purchase. CPED Staff shall not consider an incomplete proposal and Offer to Purchase. CPED Staff's review and evaluation shall focus on the following criteria: i. What is the public purpose to be achieved from the redevelopment proposal? ii. Is the proposal for redevelopment, and not for speculation or land-banking? iii. Is the redevelopment proposal an eligible activity under the Redevelopment Law? iv. Is the redevelopment proposal consistent with City development ordinances and policies, such as the Zoning Code, Comprehensive Plan and any applicable redevelopment or small area plans? v. Is the redevelopment proposal consistent with City redevelopment policies, including the House Move Policy and the Scope and Objectives of this Disposition Policy? vi. Is the proposed Purchase Price consistent with the Fair Reuse Value or the Fair Reuse Value less Writedown, if applicable, for the Property? vii. What are the Purchaser's identity, qualifications, experience and financial capacity in undertaking the redevelopment proposal? viii. What is the Purchaser's history with loan defaults, mortgage foreclosures, bankruptcies, litigation, code violations, tax delinquencies, 911 calls, criminal record, etc.? ix. What is the development cost and financing plan for the redevelopment proposal? x. What is the level of private financing committed to the redevelopment proposal, including equity and lending sources? xi. What is the level of public subsidy or other public assistance being requested to support the redevelopment proposal, including amounts and sources? xii. When will construction or rehabilitation of the redevelopment begin and be completed? Updated as of 10/6/04 10 xiii. Does the redevelopment proposal contain any unusual, unconventional, or risky development or financing conditions? xiv. What is the estimated impact of the redevelopment proposal on City budgets and revenue collections? xv. Is the redevelopment proposal a significant national, state, regional or City development project? xvi. Does the redevelopment proposal provide significant opportunities for public facilities, economic development, affordable housing, historic preservation or transit-oriented development? xvii. To what extent will the redevelopment proposal provide needed facilities, services and job opportunities to the City's low-income and minority communities and residents? xviii. Does the purchaser have any conflict of interest? e. Formalizing Staff Evaluation After completing their review and evaluation of a redevelopment proposal and offer, CPED Staff shall determine whether or not to recommend the redevelopment proposal for City Council approval. i. If a redevelopment proposal is not recommended, CPED Staff shall inform the Purchaser in writing and give the basis for not recommending the redevelopment proposal. ii. If a redevelopment proposal is to be recommended for City Council approval, CPED Staff shall prepare a preliminary report, submit the preliminary report for neighborhood review, submit elevations and site plans to the City's planning and zoning divisions for review and comment and prepare a final report for Council action. A. Preliminary Report. If a redevelopment proposal is to be recommended for City Council action, CPED Staff shall prepare a preliminary report describing the redevelopment proposal and offer(the "Preliminary Report"). The Preliminary Report shall include as much of the following information that is known and eligible for dissemination under the Data Privacy Act: (i) a description of the redevelopment proposal and offer to be recommended for City Council approval; (ii) the identity of the Purchaser and their qualifications and experience; (iii) CPED Staff findings and determinations regarding the review and evaluation criteria; (iv)the Purchase Price and any credits and Writedowns, including amounts and how they were determined; (v)the type and amount of any public subsidy or other public assistance requested by Purchaser; and (vi) a summary of any other competing redevelopment proposals and the basis for CPED Staff not recommending the proposal. The Preliminary Report shall be submitted for neighborhood review as required by City policy, state or federal laws or grant requirements. If multiple proposals have been received and are under consideration, such as but not limited to a Request for Proposal (RFP) process, the above information should be prepared for each proposal and included in the Updated as of 10/6/04 11 preliminary report. In most cases a staff recommendation will not be made at this time unless otherwise provided for in the terms of the RFP. No new Offers to Purchase shall be accepted after the Preliminary Report is sent to the neighborhood for review. B. Neighborhood Review Process. The City shall offer City designated neighborhoods the opportunity to review redevelopment proposals and offers that CPED Staff will recommend to the City Council for action. Before requesting City Council action, CPED Staff shall submit the Preliminary Report to the official neighborhood group of the designated neighborhood where the Development Property to be acquired for the redevelopment proposal is located. The neighborhood group shall have forty-five (45) days from the date CPED Staff submits the Preliminary Report to the neighborhood group in which to conduct their review, hold any meetings and submit any comments or recommendations to CPED Staff. For single family or duplex housing projects proposed on Development Properties to be sold, the Purchaser and its representatives and CPED Staff shall only be required to attend one neighborhood meeting to review the single-family or duplex housing proposal. The City council will only consider neighborhood comments that relate to building height and mass, front elevation, roof configuration, exterior materials, building setback and other similar design items. Limit neighborhood comment in the Council Report. Neighborhood recommendations that require any exterior or interior changes or upgrades that would have a significant cost impact on the project will only be considered by the Council if the Purchaser consents to such changes or upgrades and the neighborhood firmly commits to fund or finance for immediate payment the changes or upgrades at no additional cost to the Purchaser. 4. Land Sale Approval/Public Hearing a. Public Hearing Pursuant to Section 469.029, subdivision 2 of the Redevelopment Law, the City must hold a public hearing regarding the sale, lease or other disposition of Development Property to a Purchaser for a redevelopment proposal prior to City Council approval. Notice of the public hearing must be published in "Finance and Commerce" or another newspaper of general circulation, at least once, not less than ten (10) days nor more than thirty(30) days, prior to the date of the public hearing. The public hearing notice shall, at a minimum: (i) identify the Purchaser or, if multiple offers, the potential purchasers; (ii) provide the address of the Development Property to be sold, leased or otherwise disposed of; (iii) state the amount of the Purchase Price, lease rate or other consideration to be given or offered for the Development Property; and (iv) provide the date and time of the public hearing, the place where the public hearing will be held, the name and address of the CPED Staff person who can answer questions or receive written comments, and the location where additional information regarding the redevelopment proposal can be reviewed. The following types of Development Property disposition shall not require a public hearing before City Council approval: i. Public Bidding disposition; and Updated as of 10/6/04 12 ii. Public Use Donated Sale disposition. b. Report to City Council After the neighborhood review and comment period, Project Coordinator shall prepare a report to the City Council recommending the redevelopment proposal and offer(the "Council Report"). The Council Report shall include any comments or recommendations made by the neighborhood, any modifications made to the redevelopment proposal after neighborhood review period, and any conditions on the land sale approval such as 30 days to close and/or holding cost requirements. For any single-family or duplex in-fill or sideyard land sale, the Project Coordinator should, as a matter of course, request City Council approval of a shorter 30 day period by which the identified purchaser must close on the land sale or lose the ability to purchase the property in favor of an alternate buyer. The Council Report shall be signed by the CPED Director and submitted to the City Council for approval. When there are two (2) or more competing redevelopment proposals that are consistent with the review and evaluation criteria, Project Coordinator shall either: (i) recommend the redevelopment proposal that, in Project Coordinator's professional judgment, is superior to the other competing proposals. (The neighborhood opinion should not be substituted for staff professional judgment); or(ii) recommend that the City Council direct Project Coordinator to hold a lottery to select a redevelopment proposal. Project Coordinator should notify potential purchasers that any recommendation of CPED Staff or through neighborhood review is only advisory. Purchasers may not rely on any CPED Staff or neighborhood review recommendation to create any contractual or other legal obligation of the City, CPED, CPED Staff or any neighborhood organization or members. The CPED Council Report procedures are as follows: i. CPED real estate staff notifies CPED project coordinator via e-mail of deadlines for submission of request to advertise land sale. Requests are due by noon the 3rd Thursday prior to the Public Hearing Date. ii. CPED project coordinator submits request to advertise to CPED real estate staff. The request consists of: A. PC Checklist signed by Manager PC Checklist B. Offer to Purchase C. Reuse Value Opinion signed by CPED Appraiser D. Draft Council Report(in electronic form) E. Project schematics and other attachments (in paper form) F. Survey with new legal descriptions or CPED engineering staff approval of new legal descriptions (lot divisions, combinations & reconfigurations) G. Signed Broker Participation Agreement(if applicable) Updated as of 10/6/04 13 iii. CPED real estate staff does preliminary review and prepares ad to be published 10 days prior to Public Hearing Date. Ads are due and faxed to newspaper 3 days prior to the publication date. Items to be reviewed are: A. Check Minnesota Secretary of State Website to assure current business filing with the State of Minnesota and to assure correct name is used. http://da.sos.state.mn.us/minnesota/home/dahome.asp B. Check federal Website for U.S. Treasury's Office of Foreign Asset Control's (OFAC) "Specially Designated Nationals and Blocked Persons" (SDN) list. www.nasdr.com/ofac/ C. Review title evidence to determine possible title issues. D. Ascertain that all required documentation and approvals are provided. iv. CPED real estate staff prepares/reviews Council Report and supporting documentation for accuracy and completeness. CPED real estate staff makes necessary additions/corrections to Council Report and prepares and attaches the appropriate Resolution and Ward Map to report. v. CPED real estate staff forwards Council Report to Project Coordinator, section manager, and City Attorney(if assigned)for final review and edits. Final edits are due back to CPED real estate staff no later than 12 days prior to the Public Hearing Date unless otherwise specified due to agenda setting and other deadlines. vi. Project Coordinator converts attachments to final Council Report to a single (PDF file)and forwards electronic version of report and PDF attachment file to CPED real estate staff. vii. CPED real estate staff provides CPED board coordinator with a copy of final Council Report and obtains required executive staff approvals. viii. CPED real estate staff provides CPED board coordinator with 1)electronic copy of the Council Report and attachments (PDF file) (confidential page is not provided in electronic form), 2)the original signed Council Report with attachments, and 3) 12 copies of the Council Report and confidential page. ix. CPED board coordinator provides electronic Council Report and PDF file to City communications department staff for publication to the City's Website. x. CPED real estate staff provides 3 copies of final signed Council Report to CPED project coordinator. xi. CPED board coordinator provides directors and managers with package containing the agenda and their relevant reports. xii. CPED real estate staff provides CPED board coordinator with publication copy of the Public Hearing Notice. xiii. Project Coordinator is responsible for assuring that complete Council Report including attachments has been published to the City's Website. (Electronic agenda notification is available via the City's Website). Updated as of 10/6/04 14 xiv. Project Coordinator attends Public Hearing and presents Council Report. xv. Project Coordinator attends Council Meeting as necessary. xvi. CPED real estate staff obtain a certified copy of Council Resolution following Mayor's signature and publication. (Note: City-owned real property dispositions require a 2/3rds majority vote of the City Council as required by City Charter.) c. MINS CPED real estate staff and Project Coordinator update MINS as required throughout entire Land Sale Approval/Public Hearing process. 5. Redevelopment Contract Upon City Council approval, mayoral concurrence and publication, the City and the Purchaser(or an Affiliate of the Purchaser acceptable to the CPED Director)will enter into a Redevelopment Contract consistent with City Council approval that specifies the rights and responsibilities of each party. A Redevelopment Contract contains the specific terms and conditions of the sale, lease or other disposition as well as terms for the construction or rehabilitation of the project. The Redevelopment Contract acts as a purchase agreement and is subject to the statutory cancellation procedures of Minnesota Statutes, Section 559.21. For a single-family or 1-7 Unit in-fill land sale that does not involve any unique provisions, a Standard Redevelopment Contract has been developed. The Real Estate department will prepare the contract. The terms and conditions in a Redevelopment Contract will be more complex if the City will be assisting in assembling a site for development or will be providing financial assistance that will not be contracted separately(i.e., tax increment financing). Unless a shorter period is established by the City Council, CPED Staff and the Purchaser shall have up to six (6) months from the date of City Council approval in which to negotiate and execute a Redevelopment Contract. If a Redevelopment Contract is not executed within said six (6) month period, the CPED Director may withdraw the City Council's disposition approval and cease further negotiations and declare the Development Property disposition terminated. For any single-family or duplex in-fill or sideyard land sale, the Project Coordinator should, as a matter of course, request City Council approval of a shorter 30 day period by which the identified purchaser must close on the land sale or lose the ability to purchase the property in favor of an alternate buyer or pay holding costs to retain purchase rights. At the time the Purchaser signs the Redevelopment Contract, the Purchaser must pay to the City a good faith deposit equal to 10% of the Purchase Price to secure construction/rehabilitation performance on the Development Property. The good faith deposit is in addition to the full Purchase Price and is returned to the Purchaser only after the construction/rehabilitation is complete. The Redevelopment Contract shall include, but shall not be limited to, the following general provisions: a. Legal entity identification of the City and Purchaser; b. Address and legal description of the Development Property; c. The chronological history of important dates approving the transactions such as City Council actions; d. Purchase price; Updated as of 10/6/04 15 e. Description of 10% good faith deposit requirement; f. Closing date, location and conditions precedent to closing; g. A description of the City's and Developer's relative acquisition responsibilities if the City does not own the Property at the time the Redevelopment Contract is signed; h. Title evidence, closing costs and fees, and prorations for taxes, special assessments and utilities; i. Terms and plans regarding construction or rehabilitation of proposed improvements, including time frame for construction; j. Description of the certificate of completion process; k. Payment and performance bonds, insurance, condemnation and indemnification and hold harmless requirements (Note that payment and performance bonds are generally required as standard practice, but when not required by law, may be waived through a Director's report after weighing the cost of such bonds against the risk to the City's interest. Some relevant considerations are the reputation of the general contractor, the primary lender's disbursement process and the reputation of the developer); I. "As is sale," environmental condition: The City will provide the Purchaser with access to whatever environmental reports it has. The Purchaser is usually responsible for conducting and paying for further environmental investigations or geotechnical studies. The City will not provide any environmental indemnifications unless specifically approved by the City Council; m. Soil Correction and Escrow: Where it can be demonstrated that the Development Property contains substantial amounts of unsuitable soils, the Purchaser may be given a Soil Correction Allowance. The CPED Director may approve a Soil Correction Allowance of $100,000 or less. The Council must approve any Soil Correction Allowance that exceeds $100,000. The amount of the Soil Correction Allowance, along with any Writedowns and other City deductible costs, shall not reduce the Purchase Price to less than $1.00. If the Purchase Price has already been adjusted for known unsuitable soils and the Development Property is being sold on an "as is" basis, the Purchaser shall not receive a Soil Correction Allowance; n. Well Disclosure Statement; o. A statement that the Purchaser/Developer will be required to obtain all permits and comply with all laws. (The Project Coordinator should inform the Developer that it must meet with the City's Planning Department and the City Regulatory Services Department to determine all local permit requirements.) p. Competitive bidding, ethics, affirmative action, apprenticeship program, prevailing wages, small and underutilized business enterprise program, State business subsidy act and living wage and job linkage policies; q. Project financing and encumbrance of the Development Property; Updated as of 10/6/04 16 r. City's willingness to subordinate its interests: Generally, the City will agree to subordinate its reversionary and other interests in the Property to the financing required to construct the improvements. The City may not subordinate the applicable "Redevelopment Plan." s. Limitation on transfer of the Development Property and City reversionary rights; t. Purchaser's statement of noncollusion and nonspeculation; and u. Defaults and termination. 6. Special Disposition Procedures a. Deferred Purchase Price Payment Option (if requested by Purchaser) i. Project Coordinator to verify that a Purchaser developing a for-sale owner- occupied residential project of 10 units or less has requested the deferred purchase price option in the Offer to Purchase and received CPED Director approval for the deferred purchase price payment option. ii. Deferred purchase price payment option provision to be included in redevelopment contract. iii. Deferred purchase price note and mortgage in favor of the City to be recorded at conveyance closing and receipt of$1.00 option consideration. iv. CPED Staff to collect pro rata purchase price amount upon each sale to an owner-occupant buyer of a project unit and deliver a partial release of mortgage, provided, however, that the entire amount of the deferred purchase price must be repaid in full within one year from the date of conveyance of the Development Property. b. Sideyard Sales i. Non-Buildable Lots may be Sold as Sidevards CPED Staff may attempt to sell non-Buildable Lots to the adjacent property owners at a price based on the non-Buildable Lots' Fair Reuse Value as a sideyard lot. (Example: If there are two houses with 30-foot lot widths and a 30-foot lot in between, the goal would be to divide and sell one-half of the lot in between to each of the adjoining property owners. This would give each of the existing property owners a 45-foot lot width rather than having three 30-foot wide lots. This also requires the cooperation of the two existing property owners.) To request a reuse value, use the linked form: Request for Reuse Value Opinion An analysis should be done on any non-Buildable Lots to determine contributory value to adjacent property owners. If the adjoining properties already conform to their respective zoning classification requirements and the addition of the sideyard does not create added value to the properties, the sideyard will be offered to the adjoining owners at minimal cost which shall be the Fair Reuse Value. If, however, the adjacent properties are non-conforming and/or the addition of the sideyard parcel creates measurable value to said property, then the sideyard will be priced accordingly as the Fair Reuse Value. For example: if a 4-plex gains Updated as of 10/6/04 17 from assemblage the ability to have on-site parking, the Purchase Price should reflect the additional incremental value gained by the adjoining property. ii. When Buildable Lots may be Sold for Sidevards CPED Staff, with approval from the CPED Director, will make a "Finding of Fact" that a Buildable Lot is appropriate for sale as sideyard based on one or more of the following criteria: A. The shape of the Buildable Lot is irregular and is not suitable for housing construction. B. The structures on the adjacent lots are very close to the property lines and construction of a new house on the Buildable Lot will not allow permitted setbacks under the Zoning Ordinance between the new house and the adjacent structures. C. The adjacent lots contain conflicting land uses that make the Buildable Lot unsuitable for residential construction. D. The Buildable Lot contains Unsuitable Soils or poor topography or other conditions that make Soil Correction expensive or construction infeasible. E. The Buildable Lot can be used to provide needed off-street parking and/or open space to an adjacent multi-unit residential building, licensed day care center, community center, or nonresidential land use in order to make the adjacent lot comply with zoning. F. The Buildable Lot is not served by an alley, cannot accommodate access to off-street parking along a driveway from the frontage and would necessitate construction of a house plan inconsistent with the architecture of the block and neighborhood. G. If one or both of the lots adjacent to a Buildable Lot are nonconforming lots (25-30 foot lot widths) under the Minneapolis Zoning Ordinance, a portion of the Buildable Lot may be sold as a sideyard to either or both of the adjacent lot owners, as long as the remaining portion of the Buildable Lot is still a Buildable Lot. Buildable Lots sold to adjacent property owners for use as sideyards shall be sold at a per square foot Fair Reuse Value equal to the amount the buildable lot would have sold for buildable residential purposes. iii. Conservation Easement In the case where a Buildable Lot is purchased in its entirety by one adjacent owner for a sideyard, a conservation easement, made pursuant to Minnesota Statutes Chapter 84C, will be placed on the property in favor of the City to preserve the sideyard as open space and prevent construction of any improvements on the property by the current owner or any future owners, which are not approved by the City. iv. Condition of Prospective Sideyard-Purchaser's Property The City will not sell any Development Property for a sideyard if the adjacent lot is substandard or poorly maintained. CPED Development Staff working with CPED Updated as of 10/6/04 18 Planning Staff will determine if an adjacent lot is substandard or poorly maintained as defined by the Building Code and the Zoning Ordinance. v. City Council Approval of Sideyard Sales A. Public approval process. CPED Staff will provide interested parties with an opportunity for input through neighborhood review and at a public hearing held by the City Council Community Development Committee. The designated neighborhood group will ensure that all parties affected by the proposed sideyard sale and/or lot division receive notice of neighborhood review and have an opportunity to participate in that review. B. Information required for reports to City Council. At a minimum, the following information shall be included in a CPED Staff report to the City Council recommending approval of the sale of Development Property for a sideyard and a lot division: I. The dimensions of the adjacent property prior and subsequent to its combination with the proposed sideyard. II. The distance of the building on the adjacent property to the farthest lot line of the sideyard lot to be combined with the adjacent property. Ill. Any sale of the Development Property to the adjacent properties by prior action of the City. IV. A survey or sketch, including dimensions, area, and other relevant facts pertaining to the Development Property proposed to be divided for use as a sideyard. V. The facts that justify the sale, if the proposed sale involves the conveyance of a Buildable Lot as sideyard. VI. Evidence of the willingness of both adjacent property owners to purchase the entire lot for sideyard (and to agree to a conservation easement if it is a buildable lot) in the event that one of the property owners later decides not to purchase half of the City sideyard lot. c. Community Garden Sales Certain Development Properties within the Land Inventory that are vacant non-Buildable Lots, may be made available for reuse as a community garden to be used by City residents and other people who desire an opportunity to garden for recreational and sustainable purposes. i. Nonprofit or Public Purchasers Only Any interested nonprofit corporation or public agency who wants to purchase an eligible Development Property for a community garden shall submit an Offer to Purchase to CPED Staff. The sale of a Development Property for a community garden shall be done in accordance with the applicable provisions of the CPED Disposition Policy and these Procedures, including the neighborhood review, public hearing, City Council approval and Redevelopment Contract procedures. Community garden lots shall only be sold to nonprofit corporations or public Updated as of 10/6/04 19 agencies who can demonstrate their financial viability and experience in owning land and operating and maintaining a community garden and who have a program and policies in place to ensure that the community garden will be open and available to community members. Community garden lot sales should have a favorable neighborhood recommendation and the approval of all adjoining property owners. ii. Density Guidelines In order to balance the need and opportunities for housing development and the desire for community gardens, the following Density Guidelines should be used to help CPED Staff make appropriate decisions on when to sell Buildable Lots for community gardens after a written offer to purchase has been received: A. Buildable Lots will not be sold for community garden use in those neighborhoods of the city where (i)there are no legal requirements prohibiting the sale of Development Property for purposes other than development; (ii) residential lot widths are predominantly fifty (50)feet or greater with a lot area greater than 6,000 square feet; or(iii)there is not a sufficient amount of Buildable Lots available for housing development. B. Buildable Lots should only be sold for community garden use in those neighborhoods of the city where (i)there are no legal requirements prohibiting the sale of Development Property for purposes other than development; (ii) residential lot widths are predominantly less than fifty(50) feet with a lot area less than 6,000 square feet; and (iii) there is a surplus of Buildable Lots available for housing development. iii. Sale Requirements Development Properties sold for community garden lots shall be sold: (i)for a Purchase Price equal to the Fair Market Value of the lot; (ii) "as is,"with no representations or warranties of any kind with regard to soil condition or quality; (iii)with an environmental liability disclaimer by the City; and (iv)with an environmental indemnification and hold harmless from the Purchaser to the City. The Purchaser shall be responsible, at their sole cost and expense, for any and all soil tests and other site investigations and due diligence necessary or customary in evaluating the purchase of the Development Property for a community garden lot. The Purchaser shall also be responsible, at their sole cost and expense, for any Soil Correction or soil improvement costs, utility installations, accessory buildings for tools, equipment and gardening supply storage, benches, seating and other similar fixtures, plant and garden materials, edging and garden plot foundations, and any other thing that is necessary or customary in the use, operation or maintenance of a community garden. The Purchaser shall, in the use of petroleum based products, fertilizers, pesticides and other chemicals on the Development Property, take all necessary and reasonable precautions to use and store such products and chemicals in the amounts and manner as permitted by law, ordinance or regulation. iv. Conservation Easement Upon conveyance of a Development Property to a Purchaser for a community garden lot, the Purchaser shall place a conservation easement, made pursuant to Minnesota Statutes Chapter 84C, on the Property in favor of the City, to preserve the Property as open space for community garden use only, and to prevent the construction of any improvements on the Development Property that are not approved by the City. The conservation easement shall bind the Purchaser, its Updated as of 10/6/04 20 successors in interest, and all future owners of the Property. The Purchaser is permitted to construct accessory buildings on the Development Property for tools, equipment and garden supply storage as permitted by the Building Code and Zoning Ordinance. d. Leases and Other Forms of Disposition i. Leases CPED Staff will manage (i) holdover tenant leases assumed by the City as part of the acquisition of a Development Property; (ii)ground-leases of Development Property where the City retains fee title to the Development Property and the Developer owns the improvements constructed upon the Development Property; and (iii)financing leases where the redevelopment financing of the Development Property is structured within the lease. All other leases involving Development Properties will be managed by the City's Public Works Department's Property Services and Equipment Division. ii. Options, Rights of First Refusal and Exclusive Development Rights Pursuant to City Council approval CPED Staff will prepare City contracts granting options, rights of first refusal or exclusive development rights to Purchasers. CPED shall charge a purchaser obtaining an option, right of first refusal or exclusive development rights an amount equal to the fair market value of the option or rights. For such purposes, the Project Coordinator shall obtain a valuation determination from the CPED Appraiser. The Purchase Price for a Development Property subject to an option, right of first refusal or exclusive development rights may be determined at the time the City Council approves the granting of the option, right of first refusal or exclusive development rights, or at the time the City Council authorizes the sale of the Development Property and the City entering into a Redevelopment Contract with the Purchaser. Be sure to notify the CPED Real Estate Staff if Options, Rights of First Refusal or Exclusive Development Rights are granted. iii. Easements The City may dispose of all or a portion of any of its Development Properties by easement. In the granting of an easement over all or a portion of any Development Property, CPED Staff will follow the same Disposition Policy and Procedure requirements as required for the sale of a Development Property. All easements will be evidenced by an easement agreement and recorded in the Hennepin County Recorder's or Torrens Office. 7. Closing Steps Prior to scheduling the closing for the sale of the Redevelopment Property, the Project Coordinator will determine if all required documentation has been received from the Purchaser and if a pre-closing meeting is necessary. The closing is then scheduled following the pre-closing meeting. a. Pre Closing Review Prior to closing, CPED real estate staff and/or assigned City Attorney, in conjunction with the project coordinator, will verify/confirm receipt of the following: i. Mayor approval & publication of land sale ii. Executed Redevelopment Contract &other related documents Updated as of 10/6/04 21 iii. Receipt of Good Faith Deposit iv. Executed Broker Participation Agreement(if applicable) v. Determine property taxes, special assessments and pending assessments vi. Review title commitment and assist in clearing title issues vii. Review preliminary closing statement b. Closing Documents Prior to closing, CPED real estate staff and/or assigned City Attorney, in conjunction with the project coordinator, will prepare/confirm receipt of the following: i. Conveyance Deed ii. Tax Forfeiture Release (if applicable) iii. Note/Mortgage (if applicable) iv. Grant, Disbursement, & Escrow Agreements (if applicable) v. Seller's Affidavit (signed by Project Coordinator) vi. Certificate (Corporate/Partnership Transferor) vii. Certificate of Real Estate Value (CRV) viii. Final utility bills (if applicable) ix. Redeveloper Closing Letter x. Other documentation as required xi. Review/approve final settlement statement xii. Re-confirm with Project Coordinator that closing can be scheduled c. Closing CPED real estate staff and/or assigned City Attorney, in conjunction with the project coordinator, will coordinate and attend closing as necessary. CPED real estate staff requires a minimum of five (5) days notice of the closing date. d. Post-Closing Following the closing, CPED real estate staff will confirm/complete the following: i. Prepare final Notice of Land Sale ii. Prepare land sale proceeds remittance & deliver to CPED finance A. Distribute Notice of Land Sale B. Project Coordinator(with copies of closing papers) Updated as of 10/6/04 22 C. CPED real estate acquisition staff D. City Assessor's Office (with copy of CRV) E. CPED engineering staff F. Public Works property/construction management staff G. State Auditor(with copy of council report) H. City Finance Department iii. Provide CPED construction management staff with a copy of executed Redevelopment Contract and signed redeveloper letter iv. Deliver original loan documents to CPED contract management(if applicable) Project coordinator will monitor the following: i. Project coordinator will monitor soil escrow accounts and prepare payment authorizations and payment requests as required. On more complex projects, Project coordinator should have CPED Engineering staff review payment requests before authorizing payment. e. Project Completion (End Closing) Following the project completion, CPED real estate staff will confirm/complete the following: i. Obtain &forward copy of Purchase Agreement to CPED Appraiser for review ii. Notify CPED construction management staff that project is complete iii. Obtain final inspection results & copy of occupancy certificate from construction management staff iv. Obtain approval from Project Coordinator to issue Certificate of Completion. If appropriate, recommend to purchaser that developer establishes a completion escrow for end user/purchaser's benefit to secure completion of post-Certificate of Completion items at 1.5X the cost of remaining work. CPED is not to be a party to the escrow agreement and does not conduct any additional inspections after issuance of the Certificate of Completion. v. Review title commitment& prepare Certificate of Completion &Affidavit of Purchaser vi. Prepare necessary release document(i.e. Satisfaction of Mortgage, Partial Release of Mortgage, Assignment of Mortgage, etc.) & compute payoff vii. Provide necessary documents to closer and/or Redeveloper viii. Prepare good faith deposit refund payment request &forward payment to redeveloper ix. Prepare payoff proceeds remittance &deliver to CPED finance (if applicable) Updated as of 10/6/04 23 x. Provide copy of payoff remittance & release documents to CPED contract management(if applicable) xi. Provide Project Coordinator with end closing package A. Copy of executed closing statement B. Copy of payoff remittance & release document(if applicable) C. Copy of escrow recommendation letter and agreement(if applicable) D. Copy of Certificate of Completion E. Copy of executed Affidavit of Purchaser F. Copy of purchaser's Loan Application (if applicable) G. Copy of good faith refund f. Record-Keeping Real Estate maintains a disposition file that includes, at a minimum, the following: i. Certified Copy of Board Report(all reports relating to the transaction) ii. Executed Redevelopment Contract iii. Offer to Purchase iv. PC Checklist signed by manager v. Reuse value approved by CPED Appraiser vi. Good Faith Deposit Check & Remittance vii. Title Commitment viii. Settlement Statement ix. Proceeds Check & Remittance x. Deed xi. Tax Forfeiture Release (if applicable) xii. Seller's Affidavit (signed by Project Coordinator) xiii. Certificate (FRIPTA) xiv. CRV xv. Note & Mortgage (if applicable) xvi. Executed Grant, Disbursement& Escrow Agreements (if applicable) Updated as of 10/6/04 24 xvii. Certificate of Completion xviii. Satisfaction of Mortgage (if applicable) g. MINS CPED real estate staff and the Project Coordinator update MINS as required throughout entire Closing Steps process Updated as of 10/6/04 25 FY 15 DEMOLITION LOAN APPLICATION TABLE OF CONTENTS Introduction Purpose/Background ii Funding Availability ii Deadlines/Requirements ii Eligible Sites ii Eligible Applicants iii Eligible Program Costs iii Eligible Bonding Costs iii Required Appraisals or Assessments iii Awarding Loans iv Application Cover Page 1 Site Identification 2 Valuation 2 Maps and Site Features 3 History 3 Current Conditions and Development Potential 3 Cost Analysis 4 Sources and Uses of Funds(Budget Table) 4 Analysis of Loan Need 4 Financial Information 6 Payment Information _ 7 Local Government Resolution 8 Redevelopment Page i FY 15 MINNESOTA DEPARTMENT OF EMPLOYMENT AND ECONOMIC DEVELOPMENT First National Bank Building 332 Minnesota Street, Suite E200 St. Paul, Minnesota 55101 Office of Brownfields and Redevelopment 651-259-7449 1-800-657-3858 DEMOLITION LOAN APPLICATION ***YOU MUST READ THE FOLLOWING NARRATIVE TO FULLY UNDERSTAND THE APPLICATION PROCESS*** INTRODUCTION PURPOSE/BACKGROUND: Although the traditional Redevelopment Grant Program works well for sites where there are costly detriments to site development, and the need to level the playing field between these sites and undeveloped sites exist,there is also an untapped need for assistance with demolition and other redevelopment activities when either there is no current development plan or 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 be a community's immediate concern. In addition, securing and maintaining vacant dilapidated structures is costly. Therefore, DEED has amended the Redevelopment Grant Program to include loan funds for demolition activities when an imminent redevelopment opportunity does not currently exist. FUNDING AVAILABILITY: Available funding amounts vary, depending on Legislative appropriation. DEADLINES/REQUIREMENTS: The Demolition 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 DEED's Office of Brownfields and Redevelopment by 4:00 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. 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 municipality. Redevelopment Page ii FY 15 ELIGIBLE APPLICANTS "Development Authorities": Eligible applicants for this program are statutory or home rule charter cities, economic development authorities,housing and redevelopment authorities, counties, or port authorities. Note: Applicant 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 100 percent 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: 1. The agreement to repay the loan may be a general obligation of the development authority,payable primarily from a dedicated source of revenue, or other security subject to review and approval by the commissioner, and the development authority must deliver its bond or note to the commissioner, along with an attorney's opinion that security is binding and legal per bond counsel 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 the borrower and upon submission of invoices and other supporting documentation satisfactory to the commissioner; 7. An eligible borrower shall establish a dedicated source of revenue for repayment of the loan. FORGIVENESS: The commissioner may forgive 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 redevelopment plan, if the project would otherwise have received grant funding in the most recent semiannual grant round,based on the priorities in section 116J.575. REQUIRED APPRAISALS OR ASSESSMENTS: Land appraisals of the current(as-is) and expected (pre-construction) value of the site are required so that DEED 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. This estimate is generally based on similar development projects in the city. Redevelopment Page iii FY 15 AWARDING LOANS: DEED 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 DEED 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 6. 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 Redevelopment Page iv • sv Department of meat and Economic De m lflfloSetaFY 15 1st National Bank Building 332 Minnesota Street,Suite E200 St.Paul,MN 55101-1351 Demolition Loan Application Cover Page Applicant(Public Entity): Head of Applicant Agency(e.g. Mayor): Applicant Address: City: Zip Code: If the applicant is a city, what form of government? Home Rule Charter Statutory City For reference, please give the State Statute number which gives the applicant authority to carry out the activities for which you are requesting loan funds. Project Contact for the Public Entity Phone: - - E-mail: Mailing Address: Project Manager for this project from the Public Entity, in the event of an award Project Manager's Phone&email 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 FY 15 I. SITE IDENTIFICATION AND HISTORY SITE INFORMATION 1. Name of Site: Site Address: City, County or Township: Zip Code: Acreage of Site: Sq. Ft. of Site: Minnesota Legislative District# A B (Note: The Minnesota Legislature has a tool to look up legislative district numbers. You must have a precise address and know the zip code of the site. Go to: http://www.gis.leg.mn/mapserver/districts/index.html In order to qualify for a loan,the property and structures must be owned by the development authority. 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 development authority 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? 2 FY 15 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 DEED 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 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? Industrial How many are occupied? If vacant, for how long? Commercial How many are occupied? If vacant, for how long? 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. DEVELOPMENT POTENTIAL 13. Please attach a narrative of the development potential for the site. Please include information such as the type of business, any potential future tenants, potential jobs created, and any other potential economic benefit. Also please include any previous development interest in the site. 3 FY 15 II. COST ANALYSIS 14. How much money are you seeking from DEED? (May not exceed $1,000,000) 15. Fill out the budget table below indicating the uses, and amounts of all funds that will be used for eligible costs as defined on Page iii. The table should indicate the total project budget non-incurred costs. 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 III. 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 FY 15 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. 19. By providing hard data on current crime rates, and in a narrative, depict how demolition and redevelopment of the site will reduce crime. 20. Describe how demolition of the site will reduce maintenance costs. How much was spent on maintenance last year? How much was spent on maintenance in the last 5 years? 21. Describe how the community is stabilized,health is improved or any environmental benefits are achieved by the demolition of the site. 5 FY 15 IV. FINANCIAL INFORMATION 22. Submit Historical Financial Statements: Financial statements should cover the past three years. Financial Statements should include: 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 company. If the statements are more than 90 days old, provide interim data or provide a Year-End Audit, from the current or previous two year period. 23. The maximum term of the loan cannot exceed 15 years. What is your proposed term? 24. Are you issuing a bond or a note to repay the loan? 25. If you are issuing a bond, what type of bond will you be issuing to repay and secure the loan? 26. What is your time line for issuing your bond? 27. If you are issuing a note,what additional security will you be offering to secure the loan? 28. Provide your statutory authorization for issuing bonds or notes. Please provide a statement that the statutory provision authorizes the use of proceeds of such bonds to pay demolition costs and secure the loan. 6 FY 15 VI. PAYMENT INFORMATION Most loan payments take place through electronic funds transfer(EFT). To ensure proper payment, a Vendor Number assigned by Minnesota Management &Budget is required. Financial Contact Person: Telephone Number or e-mail: State of Minnesota Vendor Number: If a Minnesota Vendor Number does not exist,please supply: Minnesota Identification Number: and Federal Employer Identification Number: State Vendor info may be found at: https://supplier.swift.state.mn.us/psp/fmssupap/SUPPLIER/ERP/h/?tab=SUP_GUEST Vendor#conversions from the old system to the new SWIFT may be found at:-http://www.swift.state.mn.us/vendors 7 FY 15 VII. LOCAL GOVERNMENT RESOLUTION You must attach a resolution approving this application and committing the source of the loan repayment from the governing body of the municipality in which the site is located. A blank resolution has been attached for your convenience. You may chose to re-format this resolution but make sure to include all of the statements that appear in the resolution. RESOLUTION OF APPLICANT. Applicants must adopt and submit the following resolution. This resolution must be adopted prior to submission of the application package. BE IT RESOLVED that act as the legal sponsor for project(s) (Applicant) contained in the Demolition Loan Program to be submitted on (Day,Month,Year) and that is hereby authorized to apply to the Department of (Title of Authorized Official) Employment and Economic Development for funding of this project on behalf of (Applicant) BE IT FURTHER RESOLVED that has the legal authority to (Applicant) apply for financial assistance, and the institutional,managerial, and financial capability to ensure adequate project administration. BE IT FURTHER RESOLVED that the sources and amounts of the loan repayment and security identified in the application are committed to the project identified and the has the authority (Applicant) to incur debt by resolution of the board or council authorizing issuance of a bond or note, payable to DEED to repay and secure the loan. BE IT FURTHER RESOLVED that has not violated any (Applicant) Federal, State or local laws pertaining to fraud,bribery, graft,kickbacks, collusion, conflict of interest or other unlawful or corrupt practice. 8 FY 15 BE IT FURTHER RESOLVED that upon approval of its application by the state, may enter into an agreement with the State of Minnesota for (Applicant) the above referenced project(s), and that certifies that it will comply with (Applicant) all applicable laws and regulation as stated in all contract agreements. NOW, THEREFORE BE IT FINALLY RESOLVED that the Mayor and the Clerk(for Statutory Cities), or Title of Authorized Official(s),are hereby authorized to execute such agreements as are necessary to implement the project on behalf of the applicant. Note: Do not include the proper name, only the title of the official(s). Pursuant to Minn. Stat. §412.201, Statutory Cities must authorize both the Mayor and Clerk to execute all contracts,whereas Home Rule Charter Cities or other public entities may differ. I CERTIFY THAT the above resolution was adopted by the . (City Council,County Board,etc.) of on (Applicant) (Date) SIGNED: WITNESSED: (Authorized Official) (Signature) (Title) (Date) (Title) (Date) 9