7.2 HRSR 01-04-2016 hi Request for Action
River
To Item Number
Housing and Redevelopment Authority 7.2
Agenda Section Meeting Date Prepared by
General Business January 4, 2016 Amanda Othoudt, EDD
Item Description Reviewed by
HRA Blighted Properties Residential program Cal Portner, City Administrator
Reviewed by
Action Requested
Approve,by motion,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 last HRA work session,members and staff discussed the changes to the policy to reflect a
standardized definition of"blight." The changes are reflected in the attached document that defines
blight as "structurally substandard" defined per MN State Statue 117.025, Subdivision 7.
It was the consensus of the HRA to seek formal approval of this new program at their next HRA
meeting.
The Blighted Properties Forgivable Residential Loan program will be the third program and policy
offered by the HRA to help assist in the removal and/or redevelopment of blighted properties in the
community.
Financial Impact
None
Attachments
• Final HRA Blighted Properties &Forgivable Residential Loan program.
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INATURE
gilLiti ,.1 City of
Elk
Rive?
Residential and Redevelopment Authority
Blighted Properties Demolition &
Forgivable Residential Loan Program
Policy Guidelines & Application
City of Elk River
Housing and Redevelopment Authority
13065 Orono Parkway
Elk River,MN 55330
763.635.1040
www.elkrivermn.gov
1OIERED B Y 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$10 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
improved and these improvements will result in economic development benefits to the
municipality.
5. The structure must be defined per MN State Statue 117.025, Subdivision 7 as
"structurally substandard" . "Structurally substandard" means a building:
(1) that was inspected by the appropriate local government and cited for one or more
enforceable housing, maintenance, or building code violations;
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(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;
(3) 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:
1. The agreement to repay the loan may be a general obligation of the property owner,
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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 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.
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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.
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Blighted Properties Demolition & Forgivable
Residential Loan Application
Cover Page
Applicant:
Applicant Address:
City: Zip Code:
Proiect 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.
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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.
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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. 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.
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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.
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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.
23. The maximum term of the loan cannot exceed 5 years.
What is your proposed term?
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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$100 (Includes credit report processing fee)
K) Inspection report by an appropriate local government which identifies that
the property is cited for one or more enforceable housing, maintenance, or
building code violations.
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.
APPLICANT SIGNATURE
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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 inspected by the appropriate local government and cited for one or more
enforceable housing, maintenance, or building code violations. ; (5 points)
Subtotal Section 1 (maximum 80 points)
2. Consideration of Capacity. Check those which apply. Must meet all four to score 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)
Applicant has credit score of 680 or above; (5 points)
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Subtotal Section 2 (maximum 20 points)
3. Vacancy, Development Potential and Proximity to City Services
The length of vacancy of the property;
o 0-1 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
Subtotal Sections 1-3 (maximum 110 points)
Sub-Total Points: of a possible 110points.
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