4.7. SR 02-16-2016
Request for Action
To Item Number
Mayor and City Council 4.7
Agenda Section Meeting Date Prepared by
ConsentFebruary 16, 2016Amanda Othoudt, EDD
Item Description Reviewed by
HRA Blighted Properties Demolition and Cal Portner, City Administrator
Forgivable Residential Loan Program
Reviewed by
Action Requested
Approve, by motion, the HRA Blighted Properties Demolition and Forgivable Residential Loan Program
policy and application.
Background/Discussion
The City of Elk River Housing and its Housing and Redevelopment Authority (HRA) has developed a
program to meet the untapped need for residential 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 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.
To qualify for the Blighted Properties Demolition & Forgivable Residential loan program, the following
conditions must be 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.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.
4.The structure must be defined per MN State Statue 117.025, Subdivision 7 as “structurally
substandard”.
The Blighted Properties Demolition & Forgivable Residential Loan program can pay up to $75,000 of the
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.
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. The applicant is eligible to request forgiveness 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.
The HRA approved the attached Blighted Properties Demolition and Forgivable Residential Loan Policy
at the February 1, 2016 meeting.
Financial Impact
None
Attachments
HRA Blighted Properties Demolition and Forgivable Residential Loan Program
Residential and Redevelopment Authority
Blighted Properties Demolition &
Forgivable Residential Loan Program
Policy Guidelines & Application
HRA Adopted February 1, 2016
City Council Adopted: February 16, 2016
City of Elk River
Housing and Redevelopment Authority
13065 Orono Parkway
Elk River, MN 55330
763.635.1040
www.elkrivermn.gov
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 2
Eligible Program Costs 2
Terms 2
Forgiveness 2
Required Appraisal/Assessment 2
Awarding Loans 3
Modifications to the Policy __________________________________________3
Preferred Score ___________________________________________________ 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
Agreement _______________________________________________________________10
Application Review Worksheet ______________________________________________ 11
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 Demolition & Forgivable
Residential Loan Program operates on a semi-annual application cycle. Applications are due
Completed applications and supporting
February 1 and August 1 of each year.
documentation (3 copies) by 4:30 p.m
must be received by the city of Elk River . on the due
date to be considered for funding. An applicant may apply for more than one project, but an
NOTE:Electronic copies
individual (separate) application must be completed for each site.
will not be acceptedPlease fill out the entire application. All
in place of paper.
applications must be complete upon submission in order to qualify for a loan.
APPLICATION FEE:
The applicant must submit an application fee of $100 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.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.
4.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;
(2)in which the cited building code violations involve one or more of the
following:
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(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.
5.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 Blighted Properties Demolition & Forgivable
Residential Loan program can pay up to $75,000 of the 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
Costs incurred before the loan is awarded are not
in section 116G.03, subdivision 11.
eligible for payment
.
TERMS:
Loans for demolition costs may be made subject to the following terms and
conditions:
1.The agreement to repay the loan may be a general obligation of the property owner,
payable primarily from a dedicated source of revenue, or other security subject to review
and approval by the HRA commission.
2.The term of the loan may not exceed 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;
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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. The applicant is eligible to request forgiveness 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. Both appraisals must be done by an independent appraiser using accepted
appraisal methodology. In lieu of an appraisal, the applicant may use the current and projected
assessed values as determined by the local assessor. Values cannot be determined in any other
manner. The value of the property after the proposed development is completed is also
requested.
AWARDING LOANS:
The HRA will award loans to projects that provide the highest return
in public 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. Awards are based on the availability of funds.
MODIFICATIONS TO THE POLICY:
The HRA has the authority to review and amend or
modify The Blighted Properties Demolition and Forgivable Residential Loan program policy
and application as deemed appropriate.
PREFERED SCORE:
Precedence will be placed on applications which meet a “preferred”
score of 75 or more. 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: _______________________
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.
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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? _________________________________________________
Provide
3. 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
Attach
7. 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.
provideNote: Photographs are a very important
8. Please current photographs of the site.
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part of review process.
HISTORY
attach
9. Please 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: _______________________________________________
II. COST ANALYSIS
14. How much money are you seeking from the HRA? ________________________________
(May not exceed $75,000)
all
15. Fill out the budget table below indicating the uses, and amounts of 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.
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.
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V. FINANCIAL INFORMATION
Historical Financial Statements:
22. Submit Financial statements should cover the past three
years. Financial Statements should include: Personal Tax Returns, Personal Financial
Statement, 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.
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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_________________________________________________
BY
DATE
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APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1.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)
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 75 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)
Subtotal Section 2 (maximum 20 points)
3. Vacancy, Development Potential and Proximity to City Services
The length of vacancy of the property;
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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
o
The proximity of the property to existing city services (5 points)
Subtotal Section 3 (maximum 10 points)
Subtotal Sections 1-3 (maximum 105 points)
Sub - Total Points: of a possible 105 points.
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