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INFORMATION HRSR 05-03-2010INFORMATION ~1K~+ R1Ver MEMORANDUM TO: Housing and Redevelopment Authority FROM: Annie Deckert, Economic Development Assistant DATE: May 3, 2010 SUBJECT: Update on Housing Rehabilitation Programs/Foreclosure info Background At the Apri17, 2008 joint meeting of the HRA and City Council, the HRA and Council indicated interest in exploring several existing and potential housing partnership opportunities. At the July 7, 2008 meeting, staff presented financing programs offered by area agencies and available to residents for housing rehabilitation. The HRA suggested staff market existing programs in various forms (pamphlet creation, EDA newsletter, cable channel, etc.) and proceed from there. Update Staff has taken several steps to begin marketing available housing rehab programs to residents; • Housing Rehab Program Pamphlet & free foreclosure information o Created and distributed to approximately 50 local lenders, mortgage companies, realtors and construction companies • Cable Channel o Information about the housing programs and contact info is available on the cable channel • City Newsletter- The Current o A housing article was written summarizing the City's foreclosure initiatives and prevention services available. • City Website o All housing information was updated and restructured on the city's website and is now accessible from the website's homepage • Social Media o Housing information is periodically posted on the economic development Facebook and Twitter pages 1FC~~tMl4~T6t~ ver MEMORANDUM TO: Economic Development Authority Housing & Redevelopment Authority FROM: Catherine Mehelich, Director of Economic Development DATE: April 12, 2010 SUBJECT: Executive Director's Report The purpose of this periodic memorandum is to keep the EDA and HRA informed of various ongoing activities that often go on behind the scenes in the Economic Development Division. EDA and HRA Commissioners should feel free to bring up any questions or issues for discussion under the "Other Business" section of the Agenda. Foreclosure Initiatives The strategies to address foreclosures in Elk River are 3-fold - 1) Prevention 2) Preserve & Secure and 3) Recovery. A great amount of staff time has been spent implementing the Neighborhood Stabilization Program (NSP) with Tri-CAP and MN Housing Finance Agency in accordance with the NSP guidelines. The HRA has deployed roughly 50% of the awarded $593,820 of federal funds. The balance was recently de-obligated by MHFA and distributed to communities in greater need. To date 6 households have been provided down payment assistance ranging from $5,000 to $14,999. The HRA is able to continue administering the program in eligible neighborhoods with its fund balance. Staff continues to market the program through the newspaper, website and realtor community. Staff also continues to collect foreclosure data from the county and share information with various city departments to monitor these neighborhoods and prevent issues arising from vacant homes. Business Retention/Expansion Visits Over the past year staff has made multiple contact with the manufacturing businesses and continues to schedule visits with EDA Commissioners when possible. A separate update report on this item is included in the April 12, 2010 EDA packet. EDA/HRA Executive Director's Report Apri] 12, 2010 Page 3 of 3 MN Business Subsidy Reports Staff is working to complete the MN Business Subsidy/Assistance Rports which are required for any business assistance of $25,000 or more provided by public entities. The reports indicate the business's progress on job and wage goals established by the city. These reports axe due annually in April. Of note, Metal Craft Machine & Engineering and United Healthcare Services have recently reported exceeding the job & wage goals established with a total of 98 full-time jobs at Metal Craft and 28 full-time jobs at United Health Data Centex. C/I Buildings Energy Efficiency Revolving Loan Fund Grant Application In March staff was notified that Elk River's $235,000 grant application did not make the short list of approval to start a revolving loan fund fox energy efficiency improvements in C/I buildings. Staff believes this is a valuable concept for adding value and unique marketability to existing C/I buildings. If this is a concept the EDA would like to consider implementing as part of its existing Micro Loan Fund pool, without the matching funds, please contact staff to discuss. New TIF Legislation Staff has been monitoring potential opportunities as a result of recent legislation that adds some flexibility to the use of Tax Increment Financing for a limited period of time. The attached articles provide a summary of the legislation. S:\Community Development\Economic Development\EDA to move\Agenda\Year2010\Exec Dir report 4.12.10.doc Offices in ~{ ~ ~~ ~`~ ~ ~\ j 470 U.S. Bank Plaza 200 South Sixth Sgeet .J Minneapolis Minneapolis MN 55402 Saint Paul G ~~ ~~ ~ ~'~ (612) 337-9300 telephone (612) 337-9310 fax St. Cloud v'v'v'•kennedy-graven.com CHARTERED Affirmative Action Equal Opportunity Employer MEMORANDUM FROM: Mary Dyrseth Jenny Boulton DATE: Apri16, 2010 RE: Jobs Bill -House File 2695 The Jobs Bill (HF 2695), which was passed by the Minnesota legislature and signed into law by the Governor last week, includes several provisions which liberalize the use of tax increment financing in order to stimulate job creation. Three provisions in the Jobs Bill which maybe of interest to the City, but are only available for a limited time, include the following: 1. Compact Development Districts. (a) The Jobs Bill authorizes the establishment of "compact development districts" as a new type of tax increment financing district. A compact development district has a 25 year duration, and must satisfy the following requirements: (i) Parcels consisting of 70% of the area of the district must be "occupied" (at least 15% of a parcel must be covered) by buildings or similar structures that constitute commercial or industrial property; and (ii) The planned development will increase the total square footage of the commercial and industrial buildings by three times or more relative to the square footage of the buildings before the district was approved. (b) Tax increments from a compact development district may be used only to pay the following: (i) Administrative expenses within the 10% limitation; (ii) The costs of acquiring land located in or abutting the district; (iii) Demolition or removal buildings or other improvements and other site preparation costs for land in or abutting the district; and (iv) Installation of public infrastructure or public improvements serving the district, but excluding costs of streets, roads, highways, parking or other 366669v1 MMD KG400-1 F'' ~~ ., Alright, raise your hand if you have heard of a "housing improvement area"? Not too many hands in the air. The housing improvement area (HIA) may be one of the most overlooked tools available to Minnesota cities. The HIA allows cities to partner with residents and homeowners' associations to undertake critical reinvestment in buildings and infrastructure. With the boom in townhome construction during the past decade and with a large supply of 20 and 30 year old condominiums, the n i I use of this tool will grow. This article explains the function and application of housing improvement areas. The Need Before examining the HIA, let's consider the need. The single-family (detached) house and the apartment building are owned by a single party. This single party owns the entire building and site and is solely responsible for its maintenance. Residents of townhomes and condominiums face some unique challenges in undertaking property maintenance. The interior of the housing unit is owned by the individual homeowner. The shell of each building and all infrastructure are common property, owned jointly by all homeowners. The maintenance and revitalization of the common property is the shared responsibility of the homeowner's association, guided by a board of directors. Association members pay monthly dues to fund current and long- term maintenance. With proper planning and financial management, an association accumulates reserves needed to undertake major capital replacement projects. Problems arise when an association fails to plan for the future. Associations may find themselves financially handcuffed. Bylaws typically set limits on a board's ability to increase dues or levy special assessments without approval of homeowners, often with thresholds exceeding simple majority. These are the only revenues available to an association. Even with homeowner support to raise revenue, an underfunded association may not be able to catch up. Acceptable annual revenues may not provide the resources needed to undertake capital improvements. The lack of capital reserves may lead to a continuing downward spiral of deteriorating physical condition of the housing. Over time, the lack of investment leads to the loss of value for owners and taxing jurisdictions and the diminished ability to sell units. The HIA is a means for cities, homeowners' associations and property owners to create a collaborative solution. In simplest terms, a housing improvement area is a special taxing district used to make improvements in areas of owner-occupied housing. To pay for these improvements, a city may levy "fees" and issue bonds. It is not possible to describe all of the details and nuances of housing improvement areas in the confines of this article. The following sections highlight the basic elements of the HIA. Enabling Actions An ord finance defines the boundaries ofthe area and the improvements that can be undertaken. The HIA Statute does not define (or limit) the improvements that can be made through a HIA. Any improvement to the common property of association can be done through a HIA. Potential uses include rehabilitation of streets, garages, roofs, windows and HVAC. A resolution sets the parameters of the fee. The fee is the mechanism for collecting revenues from property in the improvement area. The resolution defines the term of the fee and how it is allocated to properties. A fee may function like a property tax, distributed on the basis of tax capacity value of property in the area. Other allocation methods include equal amount by housing unit and pro-rata share of ownership interest. A city may also assess housing improvements to benefitted property within an area. The resolution also sets the means of collecting revenues. HIA fees may be collected through the property tax system or through other means provided by the City. Process Use of these powers is subject to unique procedures. A city council has the power to initiate use of most municipal finance tools. The procedures to establish the area and to levy the fee must begin with a petition of property owners. Owners of 25% or more of the housing units that would be subject to the fee must petition the city to hold a public hearing on the area and on the proposed fee. City actions to adopt the area ordinance and the fee resolution are also subject to veto by property owners. Residents of 35% or more of the housing units subject to the fee may file an objection to the ordinance and block its adoption. Adoption of the fee resolution is blocked if the owners of 35% or more of the housing units' tax capacity subject to the fee file an objection. Objections must be filed before the effective date of the ordinance or ~F~~M~~1~ ~' -~ 'ai~ ii ;~~,td it ~, y~ iiis~! the auT~~~ tt; _sal=li~h housin;~ in~_~~~_ .~r~2"t ~u~~_is ~,r HI'. -~ e '~~unc i" C:'irr _~.,t~. ~t,;~it.~s s~~~t~cris -- 1l r~ 4'~' ~1 (tne HI;, _;<rtuh~,) i ~'~e FII:; Stat..t; ~ <~r~ c. r~er~'I~,r ~, >Ch.eC:LIIP.~1to-Jf~;cYun!u^t~0 <<~]- the resolution. The effective date cannot be less than 45 days after adoption by the city council. Bonds The HIA Statute authorizes the issuance of bonds to finance authorized housing improvements. These bonds may be general obligations of the City. General obligation housing improvement area bonds do not require an election and are not subject to the debt limit. The bonds are payable primarily out of the proceeds of the fees or from any other special assessments or revenues available to be pledged for their payment under charter or statutory authority, or from two or more of those sources. The bonds cannot be issued until after a contract for the construction of all or part of the improvements has been entered into or the work has been ordered. Jurisdiction A city is the only political subdivision authorized to establish housing improvement areas. Once the area is established, the city may assign implementation powers and responsibilities to another entity. An economic development authority, housing and redevelopment authority or other entity authorized by law to exercise their powers may be designated in the enabling ordinance as responsible for implementing and administering the housing improvement area. This action conveys the powers to make and finance improvements in the HIA. Tips Past experience with the use of housing improvement areas offers several suggestions on making use of this authority. CityJssociaion Relationship. In a perfact world, cities would not need to establish housing improvement areas. Homeowners' associations would adequately finance the maintenance of common ownership elements. A proactive role in building relationships with associations may reduce the need for HIA. Continued on Page 4 r~~. ~~ ~, ild ~ i j+ ~ . cover letter includes the response due date for the Form. We strongly encourage you to .promptly complete and return the Compliance .Check Questionnaire. It is likely that you will have questions about the appropriate responses to Form 14127. Do not hesitate to contact your bond counsel or financial advisor with your questions. Points to Remember While simple in concept, the use of BABs is subject to some requirements not part of your typical tax-exempt bond issues. • Bond proceeds may not pay for costs of issuance exceeding 2% of the bonds. • The issue cannot include capitalized interest beyond the date the improvements are placed in service. • In addition, only 65%ofneeded capitalized interest can be included in the issue since federal reimbursement will cover the other 35%. The terms of sale must include specific restrictions on the ability to reoffer the bonds at a premium. • Issues should contain an "extraordinary call" provision that allows the issuer to immediately call and prepay all outstanding principal in the event that, for any reason, the issue becomes ineligible as a BAB or the federal government no longer provides the subsidy. Taxable BABs may be refunded with tax-exempt bonds. Market Conditions The economics of BABs varies over time with changes in taxable and tax-exempt interest rates. The chart on this page shows sample general obligation interest rates for the week of March 5. Issuers should make some form of market check a part of the sale process. For competitive sales, bidders should be able to submit taxable BABs and tax-exempt bids. For negotiated sales, apre-pricing comparison of BABs and tax-exempt should be performed. These steps help the issuer to be assured that the sale will achieve the lowest effective interest expense. Looking Ahead The current authorization for the issuance of BABs ends on December 31, 2010. There appears to be growing support for extending the BAB program. Extension does not mean that the program will be the same. One area of discussion is the amount of the subsidy rate for future BABs. The Administration's FY 2011 budget proposed dropping the rate to 28%. There does not appear to be congressional support for a drastic change in the subsidy rate. At some point, a reduction in interest subsidy eliminates the economic advantage of BABs over tax-exempt bonds. Extension of the BABs may also come with new procedures on the issuance and management ofthesebonds. The contentsoftheCompliance Average Rates (March 5, 2010) 6.00% s.oo°ra 4.00% 3.ao°i° 2.oo°i° i.oo°ra o.oo°i° Data compiled by Northland Securities Check Questionnaire suggest some potential areas of interest to the IRS. Interest subsidy and direct payment options are being explored as alternatives to tax credit programs. Few issuers have used the option to issue the current version of BABs as tax credit bonds. Fasi 1 prav end Ares Pram P ductian and Consensus. The key to success is the time spent on the front end to understand needs, explore alternatives and build support for a plan of action. The petition and veto provisions require a collaborative approach to finding solutions. Limited Prepayment. Give careful thought to granting the ability of property owners to prepay the fee. The ability to prepay makes the fee function like a special assessment. Banks may require prepayment upon sale of the unit. If the fees are pledged to bonds, the city may face negative arbitrage from the inability to invest the prepayments at a rate equal to the bonds. Finally, prepayment creates administrative headaches because the implementing entity must keep amortization schedules for every housing unit. A good compromise is to allow a one-time prepayment period immediately after the fee is approved. Lasting alution. Use of a HIA should be a one-time fix and not an ongoing capital funding plan. Associations must create long- term capital improvement plans including the dues, assessments and other monies needed to pay for the improvements. Cities should have an ongoing program for monitoring these plans and the financial condition of the association. wild a eserue. The traditional way of building a debt service reserve is to borrow money in the bond issue. Another approach is to delay payment of principal for one year (or longer). Paying interest only allows for an accumulation of fee revenues to provide protection against future delinquencies. Conclusion With the growing number of aging common ownership neighborhoods in every community, the chances are good that some will experience physical and financial distress. Cities should understand the basic elements of the housing improvement area as a tool for meeting community housing needs. The information in this newsletter is based on sources believed to he reliable, but does not purport to be complete and is not warranted by Northland Securities, Inc. March ?010%ASL `_043 t. ~ ~ . .f;tv~ t. ~ ~°titi 'v°tia ~°ti~ ~°,y° ~°ti~ ~°,y° ~°~~ Rivers Edge Meeting Minutes Wednesday, April 14, 2010 Present: Fred (McCoys Pub), Stephanie(Park and Rec), Tim (Sweet P's), Tony (Dare's Funeral Home), Sandi (Edward Jones), Jim (The Bank of Elk River), Annie (City of Elk River), Wendy (Kemper Drug), Nicole (Nicole's Salon), Sandi (Edward Jones), Kay Reynolds (Vernon Company), Jim Rosman (Making Mississippi Navigatable) Meeting was called to order at 3:10 PM at Edward Jones Conference Room. Treasurer's Report: $3048.51 Secretary's Report: Minutes were amended to say that Deb Rydberg suggested that we invite Jim Rosman to talk about making the Mississippi Navigatable around the Elk River Area. The minutes were accepted as amended. City update: Annie told us that there were approximately 3, 000 at the Chamber Expo. This May be a good event for Rivers Edge to be at next year. Sweet P's had the RiversEdge Posters with map up at their Expo Booth so we received some exposure at the event. Annie said that the Energy City's Project Conserve is starting Phase 2. Elk River Residents who are interested in signing up for the program to learn more about how they can conserve energy and water can Contact Rebecca at 763-635-1068. Main Street Improvement Project. There will be discussion about this at the April 19th City Council Meeting and on Apri126th there will be an informational meeting for residents. Construction is planned for midsummer. The City of Elk River is working on a Business Recycling Program. More info to follow. Arts Alliance has requested the use of the old Auto Parts Location next to 716 Main Street to expand their offerings to the community. A feasibility study will be done to assess the cost of bringing the building up to code and impact on parking.The Cinema Building is currently full. There are four occupied residential units in the Bluffs Building. There are sti1163 empty units. A guided trip is being planned on the Northstar train from Elk River to the Mall of America for people interested in using the train but who want some help with the process. There will be a Park and Rec person and a Northstar representative to guide your way. The trip will be May 22°d. Sign up through Elk River Park and Rec. Northstar brochures with the Twins Schedule are available at City Hall. If you would like to distribute them at your business please contact Annie at 635-1042. A group from Elk River is putting together a 4th of July Celebration to be held at Lions Park. The EDA has contributed $6,000 to the effort and will also provide police for the event. The Lions are contributing $1000. Jim Boyle, the editor of the Star News, has asked to speak to the Rivers Edge Group about how we can make downtown be a part of this event. The Fireworks would be shot off by the High School. Park and Rec: Stephanie has done some research in running speaker wires to the top platform of the Rivers Edge Commons Park. The speakers would be portable and easily disconnected and would be available for use during concerts in the park. She will forward us more information about the cost of the speakers. She said that the wiring for them would not be too expensive. Someone from Park and Rec will drop off Schedules for the Downtown Music Series to Downtown Businesses. In addition to the regularly scheduled Thursday night music, one Tuesday night a month a local band will be featured. The Wylie Band will Play June 22, Elk River German Band will play July 20th and the Moose Knuckle Band will play on August 7th Stephanie verified that the Halloween Celebration downtown will be on Friday October 29th from 10 to 5 and that Santa will be downtown on Saturday, December 4th from 12 to 3. She will put that information in Park and Recs Fall/Winter Program Guide. Street Dance/Music in the Park Saturday July, 17th: Fred is organizing information and getting prices. Stephanie said that Lamont Cranston is available and would charge $2000 for that night. Fred suggested that we schedule them and we will look for a sponsor or request donations from the downtown businesses for the music. Information could go to the riders of the bike race scheduled for the 18th when they pick up their registration info. And would be posted at the bike park. Since it is a state park program, we won't have access to the riders information prior to that time. Flowers Downtown: There are currently 12 pots on the downtown side of the tracks and 1 pot at Bread of Life and 1 at the Old Post Office. Wendy will talk to Bread of Life and ask if they would we willing to substitute a pot from the Chamber for the existing pot so that all of the pots downtown matched. We could do the same at the Old Post Office. Wendy will also try to find out who at Jackson Square apartments is responsible for doing flowers in the planters that are in their wall. Robin was not at the meeting but Wendy will get her this info. New Business: Kay Reynolds from Vernon Sales Promotion shared information on types of displays that they could provide us for RiversEdge marketing. They can provide everything including tabletop displays, sails, embossed table throws, retractable banners, banners with gromets and more. There is an $85 set up fee plus the cost of the different products. The Colored Plastic Full Color Banners run about $4 a square foot. Sails run from $239 to $549 each and would be suitable to use outside or inside at a RiversEdge sponsored event. She could connect us with a graphic designer who could make us high pixel images for $200 to help put together an attractive marketing piece. Jim Rosman gave a slide presentation on the value to River Cities of making the Mississippi Navigatable to Clearwater. He feels that it would encourage more tourism in the area and make it possible for people to come downtown by boat. He has been talking to community groups along the river to drum up support for his efforts. He has also been talking to local, state and national government officials to see what the barriers are to dredging a 4 foot channel in the Mississippi and keeping it open. For more information about his presentation visit http://www.historicrivercities. com/missis sippi-river/mississippi-river-navigation-project The meeting was adjourned at 4:30PM. The next meeting is scheduled for Wednesday, May 12, 3PM at Edward Jones.