5.0 HRSR 06-01-2009ITEM # 5.
liver
MEMORANDUM
TO: Housing & Redevelopment Authority
FROM: Annie Deckert, Economic Development Assistant
DATE: June I, 2009
SUBJECT: Update on Neighborhood Stabilization Program .
Background
At its January 26, 2009 special meeting the HRA authorized submittal of an application to
MN Housing Finance Agency for Neighborhood Stabilization Program (Foreclosure
Recovery) Funds in the amount of $593,820. On February 26`h, the NSP application was
approved in the amount of $593,820. for the following program initiatives:
• Down payment assistance
• Purchase & Rehabilitation of abandoned/foreclosed homes (buyer-driven)
• Purchase & Rehabilitation of abandoned/foreclosed homes (entity-driven)
Update
The NSP funding award was approved for the following neighborhoods; Windsor Oaks,
Trott Brook (all subdivisions), Park Pointe and Elk River Station.
Staff has been working with MN Housing on executing a contract and will provide a verbal
update at the meeting. Applications for the funding mechanisms are available on Tri-GAF's
website (www.tricap.org/nsp) and staff has begun identifying potential homes for
acquisition/rehabilitation. Work on the environmental review has begun and staff has
partnered with the county and held two informational NSP open house workshops for local
realtors and lenders. Staff also attended an informational meeting regarding the 2"`~ round of
NSP funds on May 27`'' and will provide a verbal update at the meeting.
Next Steps
Following the execution of the contract, the next steps would include executing NSP
funding agreements, developing the formal program implementation documents with Tri-
CAP and starting the acquisition process. Staff continues to attend meetings and trainings
put on by GMHF for the NSP funding administration.
MANAGING I N TOUGH ECONOMIC TIME S
^ ~
The nationwide foreclosure crisis has devastated Minnesota neighborhoods
in cities across the state. In response, the City of Brooklyn Park implemented
a strategy to aggressively combat foreclosures and protect its neighborhoods.
By Jamie Uerbrugge, Jason Aarsvold, and Kimberly Berggren
ew things happen in a vacuum.
The foreclosure crisis is a prime
example of how intertwined and
complex our economy is and, by
extension, how the challenges fac-
ing local communities are linked
to regional, national, and global
trends.
In the late 1990s and early 2000s the
nation participated in an unprecedented
housing boom. Relaxed underwriting
criteria and cheap, available credit con-
verged to initiate and sustain this boom
for several years. The consensus among
many was that the housing market
could continue this growth in perpetu-
ity. We now know that this logic was
flawed, and have seen the housing mar-
ket come crashing down.
Two years ago when indications
pointed to increasing defaults resulting
from Alt-A and sub-prime mortgages,
few were predicting dire outcomes.
After all, most of us shook our heads
and asked why these folks hadn't
learned from the experience of people
who'd re-financed with "exploding
ARMS" just a couple years before?
Fool me once ...
Fast forward. Only now do we
understand that these mortgages were
bundled and sold using complicated
financial instruments and what
amounted to fictitious securitization.
Pretty soon our largest banking, invest-
ment, and insurance institutions are all
hemorrhaging money, laying people ofl,
freezing vital investment capital,
requesting taxpayer bailouts to avoid
total meltdown, and-ta-da!-we have
a global recession on our hands, the
likes of which few of us have seen.
But none of that affects our neigh-
borhoods, right? It's something that's
happening out there, far away, in New
York City and Washington, D.C. Right.
At home
The nationwide housing boom and
subsequent bust have had a very real
impact on the City of Brooklyn Park
and its neighborhoods. During the
boom, investors saw great opportunity
in Brooklyn Park's real estate market.
Inexperienced property owners specu-
lated in the community's neighbor-
hoods, drove up prices, stripped equity
from homes, and contributed little in
the way of reinvestment.
During this period of time, the
number of licensed rental properties
that are traditionally owner-occupied
nearly tripled. Neighborhood disinvest-
ment started to become evident and
livability problems proliferated.
The foreclosure epidemic com-
pounded these neighborhood livability
problems. By early 2006, Brooklyn Park
saw its number of foreclosures creeping
up. To local officials, this was a very
troubling sign requiring immediate
attention. Before the terms "sub-prime"
and "mortgage-backed security"
entered the nation's vernacular, Brook-
lyn Park set about to aggressively com-
bat foreclosures and protect its valued
neighborhoods.
As was said at the outset, things don't
happen in a vacuum. Our foreclosure
numbers are indeed startling, but
Brooklyn Park's numbers represent only
one piece in a much larger puzzle. Left
unchecked, the destabilizing force of
foreclosures in neighborhoods will very
quickly doom any community. Putting
together a foreclosure response plan is a
first step in gaining a handle on the
foreclosure issue. A response plan
requires amulti-disciplinary approach
and, in our case, it is part of a larger,
unified, comprehensive approach to
reclaiming our community.
The numbers
As the sixth most populous city in the
state and fourth largest in the Twin Cit-
ies metro area, Brooklyn Park is home
to roughly 75,000 residents. Over the
past two years, nearly 1,600 of the city's
22,719 non-apartment residential prop-
erties went through foreclosure.The
rate of foreclosure in Brooklyn Park has
increased steadily each year since 2005.
This increase has finally leveled off in
recent months. We hope this most
recent trend continues, but a predicted
nationwide "second wave" of foreclo-
sures is looming.
As of March 31, 2009, approximately
820 Brooklyn Park homes were sitting
vacant. In addition to foreclosed and
vacant properties, nearly 1,500 tradi-
tionally owner-occupied residential
units have converted to rental status.
Meanwhile, residential values are plum-
meting, with 2009 values (pay 2010)
for single-family residential properties
down approximately 10 percent.
These numbers mean significant
community challenges and call for new
and creative problem-solving, particu-
larly in a time of declining resources.
The response
Brooklyn Park is placing a high prior-
ity on the preservation and enhance-
ment of its residential neighborhoods.
These neighborhoods are critical to the
MINNESOTA CLTIF.S MAY 2009
there is a fee cap or statutorily set fee. Consult
your city attorney to ensure your fees are appro-
priate and legal.
Drop some services if possible
As you review fees, always ask this question:
should the city be providing this service? Cities
provide many discretionary services that aren't
fully paid by the fee charged. Sometimes the
best way to improve your bottom line is by
eliminating the service.
For instance, one service some cities have
discontinued is providing police staff to unlock
vehicles for citizens who have locked their keys
inside.This service was once viewed as a valu-
able public relations tool, but in tight budget
times, it is not a high enough public safety
priority to continue. Cutting these types of
services allows your city to focus its limited
funds on higher priorities.
Reduce the need for service
Although you may consider eliminating some
discretionary programs, some services are
required and can't be eliminated. In those cases,
see if you can find a way to reduce the demand
for the service.
One such example is false alarms that require
police and fire response. Most cities charge a
fee for responding to a certain number of false
alarms, but the fee doesn't always cover the full
cost. Elk River recently put in place a new ordi-
nance to help reduce the number of false alarms
that require city staff to respond. Basically, it
requires the security company to call the prop-
erty owner before calling the police or fire
department.This has drastically reduced the
number of false alarms for the city and resulted
in savings.
Another example is reinspections for building
permits. Some cities charge reinspection fees for
building permit inspections that fail because the
work wasn't complete, the contractor failed to
cancel a scheduled inspection, or correction
orders haven't been completed.The intent is to
cover costs and, more importantly, to encourage
contractors to complete their work according
to standards before they request an inspection.
The charge is a way to reduce the demand for
the service.
Other revenue sources
There are numerous types of city fees, both new
and old, that are getting attention lately. For
Before you decide
to propose a new fee,
it's important to
review the legal issues.
Make sure the fee is
allowed by law and
determine whether
there is a fee cap or
statutorily set fee.
Although you may
consider eliminating
some discretionary
programs, some services
are required and can't
be eliminated. In those
cases, seerf you can
find a way to reduce the
demand for the service.
example, the Legislature is considering allowing
cities to implement street improvement districts.
There are too many other possibilities to list, but
here are a few that seem to be gaining in popu-
larity lately: non-resident fees for programs and
services; special assessments for seal coating or
other improvements that were previously funded
by taxes; franchise fees for private cable or utility
companies operating in the city; street light util-
ity fees; and prosecution training programs that
bring traffic offense funds to the city.
As you begin the 2010 budget process, it is
a good time to start reviewing all of your city's
revenues. With a little detective work to uncover
new revenue sources, the willingness to propose
new fees, and adjustment of current fees to reflect
real costs, you should be able to generate addi-
tional revenue.
Continue the conversation at the
LMC Annual Conference
One benefit of working for a city is that we
are willing and strongly encouraged to share
experiences and ideas. Whenever possible, be
sure to share an idea that worked and spread
the news about innovative revenue sources
you have discovered. Cities will have a great
opportunity for sharing ideas at the League of
Minnesota Cities (LMC) 2009 Annual Confer-
ence and Marketplace June 24-26 in St. Paul.
You can learn more about revenue ideas as
well as a variety of other important topics.
For more information and to register for the
conference, visit wwwlmc.org/page/1/
annual-conference09 ;jsp. ~
Lori Johnson, city administrator of Elk River, unll
be presenting the LMC Annual Conference session,
"Alternative Revenue Sources."Phone: (763)
635-1000. E-mail: johnson@ci.elk-river.mn.us.
MAY Z ~ 0 9 MINNESOTA C I T I E S
city's long-term stability. An innovative
city-wide initiative known as the Neigh-
borhoodAction Program is setting
the stage for improved neighborhood
livability. The city also established a
comprehensive foreclosure response plan.
Together, these two efforts are success-
fully combating the city's most pressing
problems and preserving Brooklyn Park's
neighborhoods.
The goal of the Neighborhood
Action Program is to reduce crime and
improve the livability of challenged and
distressed single-family neighborhoods.
The city established aproblem-solving
collaborative among city departments
designed to promote information-shar-
ing and strategic deployment of
resources.The effort created synergies
that gave rise to new crime-fighting
and quality-of--life improvement strate-
gies and tools, such as:
^ Increased information exchanges
between city departments and resi-
dent groups to leverage resident
involvement in problem-solving
efforts.
^ Enhanced law enforcement presence
focusing on repeat criminal offenders
that have negatively affected the
safety of the community.
^ Increased property maintenance
inspections and code enforcement in
focus areas to improve the quality of
life in neighborhoods.
^ Financing assistance for homeowners
to make needed repairs and upgrades
as well as redevelopment of blighted
properties.
^ New databases to identify, track, and
arrest repeat criminal offenders.
^ New analysis methods to measure the
effectiveness of crime-fighting and
code enforcement strategies.
^ New licensing enforcement policies to
deal with problem rental property
owners and unlicensed rental properties.
Monitoring the rapid increase in prop-
erty foreclosures, Brooklyn Park recog-
nized the need to develop a systematic
plan to mitigate the expected impacts of
foreclosures.These anticipated impacts
included increasing property vacancy,
increasing code enforcement caseloads,
and utility shut-offs.The response plan
contains three primary strategies: (1)
foreclosure prevention, (2) preservation
and maintenance of foreclosed homes,
and (3) foreclosure recovery.
Foreclosure prevention
Preventing foreclosures provides com-
munities the biggest bang for the buck.
Foreclosure prevention counseling is
free to all Minnesotans, and Brooklyn
Park works closely with the Home-
ownership Center and Community
Action Partnership for Suburban Hen-
nepin to deliver these services to residents.
The city has had office hours for a
foreclosure prevention counselor one
day a week at City Hall.This provides
an added level of convenience for resi-
dents, allowing them to drop in for free
counseling. Enhancing outreach
through marketing and special events
has also been critical to make home-
owners aware of this free resource.
Foreclosure prevention counseling
has been able to help avoid foreclosure
for 20 percent to 30 percent of people
seeking assistance. Given the circum-
stances, this success rate is tremendous.
Preservation and maintenance
Recognizing that not all foreclosures
can be prevented, preserving and main-
taining foreclosed homes helps prevent
further property damage and value loss.
Streamlining processes, enhancing cross-
department communication, and ramp-
ing up code enforcement efforts have
helped make this successful.
City departments work together to
identify vacant and foreclosed homes,
properly secure vacant units, turn off
water service when necessary, and mon-
itor properties for unsafe conditions
until they are reoccupied. While staff-
intensive, these efforts protect homes
from vandalism and broken pipes that
can cause water damage.
Foreclosure recovery
Even with aggressive preservation and
maintenance efforts, some homes are
damaged to such an extent that they are
unlikely to be immediately reoccupied
and may even need to be demolished.
For those homes that can be fixed,
repair costs often exceed resale value,
providing little incentive for private
market rehabilitation.
Fortunately, through the Housing
and Economic Recovery Act, the fed-
eral government has made available
Neighborhood Stabilization Program
(NSP) funding to help address these
challenges. Brooklyn Park will utilize its
NSP funding to promote foreclosure
recovery in the following manner:
MAY 2009 MIN NL'SOTA CITIES
^ Establish partnerships with for-profit
and nonprofit developers to acquire
and rehabilitate foreclosed homes,
and put them up for sale.
^ Remove homes creating a blighting
influence in neighborhoods through
direct acquisition and demolition.
^ Create homebuyer incentive pro-
grams for the purchase and/or reha-
bilitation of foreclosed properties.
Witnessing national and even global
crises destabilize our neighborhoods is
a reminder of the fragility of our cit-
ies and the extent to which they are
subject to events beyond our control.
It is easy for local leaders to be over-
come with a sense offutility.This kind
of environment, however, provides an
opportunity to showcase the hard work
of individuals involved in local govern-
ment and leads to innovation that pays
long-term dividends.
Successful communities pay close
attention to national and global trends
and continually assess how these trends
will play out at the local level. The abil-
ity to anticipate change and respond
with a strong plan of action should be a
core competency of every community.
Continue the conversation at the
LMC Annual Conference
What innovative solutions has your city
developed to deal with the foreclosure
crisis? Whenever possible, be sure to
share an idea that worked for your city
and spread the news about innovative
solutions. Cities will have a great
opportunity for sharing ideas at the
League of Minnesota Cities (LMC)
2009 Annual Conference and Market-
place June 24-26 in St. Paul.You can
learn more about dealing with the fore-
closure crisis as well as a variety of
other important topics. For more infor-
mation and to register for the confer-
ence, visit www lme.org/page/1/
annual-conference09;jsp. t
Jamie T/erbrugye is the city manager of
Brooklyn Park. E-mail: Jamie. herbrugge@
brooklynpark. org. Jason Aarsvold is economic
and redevelopment director with Brooklyn
Park. E-mail:_jason.Aarsvold@brooklyn-
park.org. Kimberly Berggren is development
project manager with Brooklyn Park.
E-mail: Kimberly.Ber~gren@brooklypark.
org. T~erbrugge and Aarsvold will be present-
ing the LMCAnnual Conference session,
"Tackling Foreclosure Problems."
MANAGING I N TOUGH ECONOMIC TIME S
^
The focus on sustainability and `green" practices is crucial for the future of our planet.
As an added benefit, many green initiatives can also save your city money.
In these times, that's not just nice-that's necessary.
By Jim Giebel
nergy is one of the largest expen-
ditures for city governments, so
it's more important than ever to
make sure your city's energy use
is as efficient as possible. It's good
for the environment as well as for
your city's budget.
City buildings, for example,
use-and often waste-a ton of energy.
But there are many low- and no-cost
energy conservation strategies cities can
employ to combat this waste. Many of
these are well-known practices that are
easy to implement, so it's important that
you evaluate your city's energy use to
make sure you are taking advantage of
these simple techniques.
Monitor your buildings
The first step in your energy evaluation
is to establish a baseline for all of your
city buildings. Start by collecting two
years' worth of billing data for all of the
gas and electric meters of each building.
This will give you an average cost and
help you measure the success of your
energy-saving initiatives.
One way to help you track your
energy use and cost is to make sure
your city is in compliance with the
state requirements of the Minnesota
"Buildings, Benchmarking and Beyond"
initiative. Under this program, govern-
ment entities must submit their electric
and natural gas energy usage numbers
for all public buildings.The purpose
is to identify inefficient energy use in
public buildings.
If your city has not submitted this
data, you should do so as soon as pos-
sible as the deadline has already past.
Submitting this information is required
by the state, and can actually be quite
helpful to cities.The state has contracted
with the Weidt Group to analyze the
data for comparison, so individual cities
can see where they stand on energy use.
The Weidt Group is also providing
pie charts, graphs, comparisons by type
of building (fire, police, libraries), and
other free tools that will aid in your
tracking of energy.
The Environmental Protection
Agency Energy Star program also offers
free tools to help you track the energy
use of your buildings. Learn about them
at www energystar.gov (click on
"Buildings & Plants").
Temperature
Making sure your thermostat is set at
the optimal temperature is one of the
easiest, no-cost strategies for reducing
energy and saving money.This may
sound simple, but too often, thermostats
are set at the same temperature whether
the building is in use or not.
Suggested heating temperature range
is between 66 and 70 degrees when the
building is in use, and 58 to 60 degrees
when unoccupied. For air conditioning,
the suggested temperature range is 76
to 80 degrees at all times. Temperatures
can be automatically adjusted at specific
times with an energy management sys-
tem or a simplistic setback thermostat.
It is estimated that for every degree
adjustment in heating/cooling, a savings
of 1 percent to 2 percent can be expected.
Lighting
For most organizations, lighting con-
sumes more than 30 percent of total
energy usage. This is an area where
you have the opportunity to make a
major impact.
One easy way to save energy is to
make use of the least expensive form
of light in buildings-sunlight-other-
wise known as daylighting. Daylight-
ing, in its simplest form, is simply taking
advantage of any indirect sunlight that
comes into your buildings.
Open shades during the day, espe-
cially during the winter months, to
permit as much natural sunlight in as
possible.This may allow you to turn off
some lights near the windows. And there
is an added benefit: tests have shown
letting more sunlight into the office
results in higher worker productivity.
The type of lighting in your buildings
will also affect your energy bill. For
instance, incandescent lights are only
about 10 percent efficient as light, with
the other 90 percent given off as heat.
They should be replaced immediately
with compact fluorescent lights (CFCs)
for immediate energy savings. Don't wait
until they burn out-they are costing
you money now.
MINNESOTA CITIES MAY 2009