7.2. HRSR 09-08-2020 City of
Elk -
RiVer Request for Action
To Item Number
Housing and Redevelopment Authority 7.2
Agenda Section Meeting Date Prepared by
General Business September 8, 2020 Colleen Eddy, Economic Development Specialist
Item Description Reviewed by
Blighted Properties Residential Forgivable Loan Amanda Othoudt,ED Director
Program and Policy Reviewed by
Cal Portner, City Administrator
Action Requested
Approve,by motion,the Blighted Properties Residential Forgivable Loan Program and Policy.
Background/Discussion
At their February 1, 2016, meeting, the HRA adopted the Blighted Properties Residential Forgivable Loan
Program.
At their November 4, 2019, meeting,the consensus of the HRA was to discuss 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.
Over the past few months, the HRA worked with staff and the attorney on policy changes.
At their August 3, 2020, HRA meeting, the HRA directed staff to make the following final revisions to the
policy:
Attachment Checklist
E) Financial statements: Requiring one year of personal federal tax returns. Financial statements should
include details of existing debt agreements. Debt should include any student loans,payment amounts, and
history of any debt being deferred during COVID19.
XV Remove
Application Review Worksheet
(Page 14):it was the consensus of the commission to remove the scoring component of the checklist
worksheet.
Financial Impact
N/A
The Elk River Vision
A Y�elcoming community nvith revolutionary and spirited resourcefulness, exceptional P U W E H E o s r
service, and community engagement that encourages and inspires prosperity ,g /` UR
Mission/Policy/Goal
The program was developed 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
Attachments
■ HRA Blighted Properties Residential Forgivable Loan Program—Redlined and Clean
N:\Departments\Community Development\Economic Development\HRA\Administrative\Agenda\2020\09-08-2020\7.2 sr Blighted Properties
Policy Discussion.docx
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City of
Elk -�-�
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IRUVe r%MO--,
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: 12020
City Council Amended: 12020
Citv of Elk River
Housing and Redevelopment Authority
13065 Orono Parkwuv
Elk River,AIN 55330
763.635.1040
www.elkrivernui.gov
P 0 W E E 0 B Y
w A T R U
If"
Blighted Properties Demolition&Forgivable Residential Loan Program
49847M 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
Expected Value Upon Completion 3
Awarding Loans 3
Simultaneous Microloans 3
Cost of Review 3
Procedural Guidelines for Appointment and Approval 3
Microloan Policy Review 4
Right to Refusal 5
Preferred Score 5
Application
Cover Page 6
Site Identification and History 6
Valuation 6
Maps and Site Features 6
History 7
Current Conditions and Development Potential 7
Cost Analysis 7
Sources and Uses of Funds(Budget Table) 9
Analysis of Loan Need 9
Financial Information 9
Agreement 13
Application Review Worksheet 14
Blighted Properties Demolition&Forgivable Residential Loan Program
498470/2 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:
LUpon completion of the proposed project,the structures on the property will be owner-
occupied dwellings that align with the surrounding neighborhood. The dwelling will
include at a minimum 1600 finished square feet with 2 bedrooms and 1.5 baths and a
two-car garage;
2.The current 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;
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498470v2 JSB EL185-13
(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.
(5) Applicants must submit evidence that the property is"structurally substandard"
in the form of a property inspection report. The property inspection report may
be completed by City staff and the fee for the City's services is included in the
$500 application fee..
ELIGIBLE APPLICANTS:Eligible applicants for this program must be either:
1. Individual 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.
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.
ELIGIBLE PROGRAM COSTS: The Blighted Properties Demolition&Forgivable
Residential Loan program can pay up to$20,000 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 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:
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 board of commissioners.
2. The loan shall bear interest at a rate equal to three percent;
3. The loan shall be forgiven if the requirements under the heading"Forgiveness"are met.
4. The principal amount of a loan may not exceed$20,000;
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 Executive Director.
FORGIVENESS: The HRA will forgive the principal of and interest accrued on the loan up to
100 percent of the original loan amount,not to exceed the costs of demolition upon the submission
to the HRA's Executive Director of: (i)a certificate of occupancy is issued by the City for the
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498470v2 JSB EL185-13
property;and(ii)a signed certificate from the first owner of the property certifying that the property
will be owner-occupied and the property will qualify for homestead designation. In addition,the
Borrower must receive a certificate of occupancy for the new building within 1 year from
demolition. If the above conditions are not met,the loan will be due and payable un full.
EXPECTED VALUE UPON COMPLETION: The applicant must submit evidence of the
current assessed value of the property and the projected assessed value of the property upon
completion as determined by the local assessor.
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.
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 rnicroloan
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.
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.
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498470v2 JSB EL185-13
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 and whether the
proposed Project meets the requirements of this policy.
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 Comunitment 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.
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.
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498470v2 JSB EL185-13
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 vAtich meet a"prefeffe&'scofe of 75 of more.To tul
this requirement of reviewing applications in an objective and fair manner,the follo i - .. .
have been assigned maximum point values in order to systematically aw d loans. All assigned
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498470v2 JSB EL185-13
Blighted Properties Demolition & Forgivable
Residential Loan Application
Cover Page
AVplicant
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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49847M JSB EL185-13
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 assessed value of the Site?
Attach the assessor's value.
5. What is the projected assessed value after the demolition activities have been completed(prior
to development?
Attach the assessor's value.
6. What is the projected assessed 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
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498470v2 JSB EL185-13
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
II. COST ANALYSIS
14. How much money are you seeking from the HRA?
(May not exceed$20,000)
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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498470v2 JSB EL185-13
III. SOURCES AND USES OF FUNDS
Demolition Uses ofFunds 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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498470v2 JSB EL185-13
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. Will the property be used as a primary residence?
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49847M JSB EL185-13
VI. ATTACHMENTS CHECKLIST
Please attach the following.
A) Residential Loan Program
1. Site Information
2. Site Valuation
3. Maps and Site Features
4. Hisfor
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 Retum-Personal Financial Statement
2. Details of Existing Debt Agreements -- Formatted:Space After: 10 pt,Don't add space between
paragraphs of the same style,Line spacing: Multiple 1.15li,
3.8neearslMost Current Federal Tax Returns Adjust space between Latin and Asian text,Adjust space
2. Def?As of Existing Debt Agyeefitettfs between Asian text and numbers
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
]) 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. .
three major suppliers,atte beittg the eottsttuetie)tt stipplier,attd(iii)Builditig ittspeetors fte)
two cities v4iefe the Builder has constructed new housing-,vithin the past three year S;0
positive e3q)erience working with the Elk-River HRA(as determined by HIR-4
}
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498470v2 JSB EL185-13
(N) If the applicant is a builder,proof of builder's comprehensive general liability
with property damage protection insurance and other customary insurance
(0) If the applicant is a builder,proof of builder's worker's compensation
insurance
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498470v2 JSB EL185-13
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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498470v2 JSB EL185-13
APPLICATION REVIEW WORKSHEET
TO BE COMPLETED BY CITY STAFF
1. in the event of multiple applieants,and limited fttnds dedieated to the program,the
attached worksheet._:11 be ed to,1..*.......,.:ne h(yw the funds.__:11 1_.. ,.11ocated
The project meets the criteria set forth in Section 1V of the Blighted Properties
Forgivable Residential Loan Pohey."ec,6 Mose mhieh ap##.
I- Upon conTletion of e project,the property andstructures will be owneroccupied
11 The curretiL sLa—L—e constitutes a threat to public safe�because of inadequate
P Upott completion,of the dentolitiott,the HRA reasottably expects that the property wiU b
(10 Points)
2. Consideration of Capacity. "ec,6 thosevhich app#. Alu#meet affftm-Ag score 20pohits. Opoints�c
E; Applicant included a realistic inTlemetuation/project schedule;(5 points)
11 Applicant has obtained a letter of cominitment to finance the project from their F
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498470d2 JSB EL185-13
3. Vacancy,Development Potential and Proximity to City Sen4ces
D The length of vacaticy of the Pfopefty-I
SubtotalSee6ons 1-3(maximum 105poino
Sub-Total Points: of a possible 105 points.
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498470v2 JSB EL185-13