8.1. HRSR 02-03-2020
Request for Action
To Item Number
Housing and Redevelopment Authority 8.1
Agenda Section Meeting Date Prepared by
Work Session February 3, 2020 Amanda Othoudt, ED Director
Item Description Reviewed by
Blighted Properties Residential Forgivable Loan Cal Portner, City Administrator
Program and Policy Discussion
Reviewed by
Action Requested
Information presented for discussion purposes.
Background/Discussion
At the August 5, 2019, meeting, the HRA discussed the two programs the city implemented to improve
the community’s housing stock, the Blighted Properties Residential Forgivable Loan Program and the
HRA Rehabilitation Loan Program.
At their January 6, 2020, meeting, the HRA discussed proposed changes to the Blighted Properties
Program and policy to allow flexibility for builders to acquire these types of homes with the caveat that
the properties will be owner-occupied upon completion.
Staff will continue the review of the attorney recommendations with the commission this evening.
Financial Impact
N/A
Attachments
Blighted Properties Residential Forgivable Loan Policy (attorney redlined)
The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional
service, and community engagement that encourages and inspires prosperity
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
HRA Amended: ____________, 2020
City Council Amended: _____________, 2020
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
498470v2 JSB EL185-13
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
498470v2 JSB EL185-13
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: Applications are due on the first Monday of each
month. Completed applications and supporting documentation must be received by the city of
Elk River by 4:30 p.m. on the due date to be considered for funding.
APPLICATION FEE: The applicant must submit an application fee of $500 plus legal and any
other out-of-pocket costs incurred by the HRA 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 redevelopment 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 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:
(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;
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(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.
(4)(5) Applicants must submit evidence that the property is “structurally substandard”
in the form of a property inspection report. Commented \[FGA1\]: Amanda, could the City property
inspector perform the inspection for a fee to be reimbursed by the
applicant or do you want the applicant to hire a third party?
ELIGIBLE APPLICANTS: Eligible applicants for this program must be either:must be the owner of the property at the time of the application or before disbursement of funds.
1. An iIndividual who will build, own and occupy a new owner-occupied dwelling
following the demolition of the existing structures; or
2. Contractor who will build an owner-occupied home on the property following the
demolition of the structure. Commented \[FGA2\]: Does the builder need to have a contract
with a future purchaser or just want to build on the property?
Property owners, unless licensed in the trade specified, may not put any sweat equity into the
demolition or construction of the foundation, wall/roof framing, shingling, exterior work,
electrical/plumbing/HVAC systems or interior carpentry. Commented \[WU3\]: Refer to attorney? Is this necessary?
ELIGIBLE PROGRAM COSTS: Tthe Blighted Properties Demolition & Forgivable
Residential Loan program can pay up to $25,000 of the demolition costs for a qualifying site. Commented \[WU4\]: Require two bids
“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 demolition costs may be made subject to the following terms and
conditions: Commented \[WU5\]: Stopped Here 1/6/2020
1. The agreement to repay the loan must be a personal obligation of the property owner,
payable primarily from an identified source of income of the property owner, or other
security subject to review and approval by the HRA commission.board of commissioners. Commented \[FGA6\]: Who’s obligated the repay? The property
owner (current or future) or the contractor? I’ve assumed the
2. The loan shall bear interest at a rate equal to two three percent;
property owner.
3. If the property owner ceases to occupy the property as his/her/their primary residence be occupied as a primary residence or is offered for rent prior to
Does the HRA currently require any mortgage or other document
the fifth anniversary of the closing date, the property owner will immediately repay the
securing the loan? If so, is the mortgage on the property? What if
principal amount of the loan and accrued interest to the date of repayment;
the builder obtains the loan? Maybe this is treated as a grant.
4. The principal amount of a loan may not exceed $25,000;
5. 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. Commented \[FGA7\]: Are there any design requirements other
than meeting zoning requirements?
5.6. If the applicant is a builder, upon sale of the property, the future property owner agreeswill enter
into an agreement to pay back the loan if the property is not owner-occupied for five years. Commented \[FGA8\]: One option would be to have the property
ineligible for a city rental license until any outstanding debt is
repaid.
FORGIVENESS: The HRA will forgive the principal of the loan and interest accrued but unpaid
thereon up to 100 percent of the original loan amount, not to exceed the costs of demolition, after 5
years of maintaining the property as an owner occupied dwelling. Upon request from the HRA, the
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property ownerborrower will provide evidence that the property has been owner occupied for 5
years.
REQUIRED APPRAISALS OR ASSESSMENTS: Land appraisals of the current (as-is) and
expected (post-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.
SIMULTANEOUS MICROLOANS
The simultaneous use of different HRA microloan programs by any one borrower or for any one
project is prohibited.
CALL OF LOAN
A loan shall become due and payable in full if the owner-occupant relocates outside of the city of
Elk River prior to the maturity date of the loanproperty is not used as an owner-occupied dwelling
for five years following the award date.
COST OF REVIEW
The applicant will be responsible for all legal, recording, and other fees required for protection of
a security interest in the loan, payable by a $500 processing fee, which is paid at the time of
application, plus legal and any other out-of-pocket costs incurred by the HRA. In addition to the
processing fee, all legal and filing fees shall be paid by the borrower at loan closing.
PROCEDURAL GUIDELINES FOR APPLICATION AND APPROVAL
1. All applicants shall first contact a primary lending institution which will be assisting with
the financing of the overall project.
2. The applicant shall then meet with city staff to obtain information about the microloan
program, discuss the project, and obtain application forms.
3. The applicant shall complete and submit an application form to the city, along with a
$500 processing fee plus legal and any other out-of-pocket costs incurred by the HRA.
The fee is used to cover processing expenses and any remaining funds will be returned to
the applicant. The applicant must provide a letter of commitment for conventional
financing from the primary lending institution \[or evidence of sufficient equity to
complete the project?.\]
4. The HRA is a governmental entity and as such must provide public access to public data
it receives. Data deemed by applicant to be nonpublic data under State law should be so
designated or marked by applicant. See Minnesota Statutes, Chapter 13, as amended.
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Formatted: Highlight
5. The application will be reviewed by the city staff to determine if it conforms to all city
policies and ordinances and to consider the following:
a. The availability and applicability of other governmental grants and/or
microloan programs.
b. Whether the proposed project after demolition will result in conformance with
building and zoning codes.
c. Whether it is desirous and in the best interests of the public to provide funding
for the project.
6. The HRA Commissioners will review each application in terms of its consistency with
the goals of the city’s Comprehensive Plan and the Housing and Redevelopment
Authority’s Strategic Plan and in relation to the project’s overall impact on the
community’s economy.
7. The HRA Commissioners will evaluate the project application in terms of the following:
a. Project Design - Evaluation of project design will include review of proposed
activities, time lines and a capacity to implement the project.
b. Financial Feasibility - Availability of funds, private involvement, financial
packaging and cost effectiveness.
Appropriate ratio of private funds to Microloan funds.
Sufficient cash flow to cover proposed debt service as demonstrated by
financial statements.
Letter of Commitment from applicant pledging to complete the project
during proposed project duration, if the loan application is approved.
Letter of Commitment from other financing sources stating terms and
conditions of their participation in the project if applicable.
c. All other information as required in the application and/or additional information
as may be requested by the Economic Development staff.
d. Project compliance with all city codes and policies.
e. Microloan Objectives - the applicant must demonstrate how the proposed
activities will meet at least one of the following objectives:
The project contributes to the fulfillment of the city’s approved and adopted
economic development and/or redevelopment plans.
The project prevents or eliminates slums and blight.
8. The HRA Commissioners will approve, deny, or request a resubmission of any
application submitted under this policy.
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MICROLOAN POLICY REVIEW
The above criteria will be reviewed on an annual basis to ensure that the policies reflected in this
document are consistent with the economic development goals set forth by the city.
RIGHT OF REFUSAL
The HRA may deny any application if it is found not consistent with the goals of the city’s
Comprehensive Plan and Housing and Redevelopment Authority Strategic Plan, or Mississippi
Connections Plan and in relation to the project’s overall impact on the community’s economy.
PREFERRED 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? _________________________________________________
3. Provide a legal description of the site.
SITE VALUATION
4. What is the current appraised or assessed value of the Site? ___________________
Attach the appraisal or assessor’s value.
5. What is the projected appraised or assessed value after the demolition activities have been
completed (prior to development)? ________________________________________
Attach the appraisal or assessor’s value.
6. What is the projected value after the proposed development is complete? _______________
MAPS AND SITE FEATURES
7. Attach an accurate and legible site and location map indicating the site showing locations of
prominent and relevant site features such as buildings, retaining walls, etc. (NOTE: maps shall
include property boundaries, a north arrow and bar scale). The map(s) should show the
following:
a) The current condition of the site including labeled structures and where and for what
activities the HRA money will apply.
b) The proposed potential development of the site including labeled structures if
known.
8. Please provide current photographs of the site. Note: Photographs are a very important
part of review process.
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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: ________________________________________________
II. COST ANALYSIS
14. How much money are you seeking from the HRA? ________________________________
(May not exceed $25,000)
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
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.
V. FINANCIAL INFORMATION
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22. Submit Historical Financial Statements: Financial statements should cover the past three
years. Financial Statements should include: Personal Tax Returns, Personal Financial
Statement, and details on existing debt agreements. A commitment letter from the primary
financial institution must accompany the application.
23. Are you committed to using the property as your primary residence for at least 5 years?
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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. Details of Existing Debt Agreements
_______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 $500 plus legal and any other out-of-pocket costs incurred by
the HRA
______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.
_______(L) If the applicant is a builder, builder’s financial capability statement (a statement
from a financial institution indicating willingness, with standard contingencies, to provide
sufficient construction capital to complete the project.).
(M) If the applicant is a builder, references of (i) five satisfied customers, and (ii)
three major suppliers, one being the construction supplier, and (iii) Building inspectors from
two cities where the Builder has constructed new housing within the past three years; OR
previous positive experience working with the Elk River HRA (as determined by HRA
Staff).
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____ (N) If the applicant is a builder, proof of builder’s comprehensive general liability
with property damage protection insurance and other customary insurance
_______(O) If the applicant is a builder, proof of builder’s worker’s compensation
insurance
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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 redevelopment 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 obtained a letter of commitment to finance the project from their primary
lender; (5 points)
Subtotal Section 2 (maximum 20 points)
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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
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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