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071612completeagenda
CITY OF RICHFIELD, MINNESOTA MONDAY, JULY 16, 2012 RICHFIELD MUNICIPAL CENTER 6700 PORTLAND AVENUE REGULAR HOUSING AND REDEVELOPMENT AUTHORITY MEETING COUNCIL CHAMBERS 7:00 P.M. AGENDA Call to order Roll call 1. Approval of minutes of Regular HRA Meeting of June 18, 2012 2. HRA approval of agenda 3. Consent Calendar contains several separate items which are acted upon by the HRA in one motion. Once the Consent Calendar has been approved, the individual items and recommended actions have also been approved. No further HRA action on these items is necessary. However, any HRA Commissioner may request that an item be removed from the Consent Calendar and placed on the regular agenda for HRA discussion and action. All items listed on the Consent Calendar are recommended for approval. A. Consideration of approval of contract with S.R. Stevens Excavating, Inc. for demolition of 6812-14th Avenue, 6438 Bloomington Avenue and 6315-16th Avenue S.R. No. 29 Notes: 4. Consideration of request for subordination of HRA Transformation Loan at 6415 Second Avenue Staff Report No. 30 Notes: 5. Public hearing to consider sale of HRA property at 301 77th Street West and purchase agreement to LaMettry's Collision, Inc. Staff Report No. 31 Notes: 6. Consideration of consent to second mortgage request allowing Local Initiatives Support Corporation to file mortgage against 6330 Lyndale Avenue Staff Report No. 32 Notes: 7. Consideration of amendment to Subordination and Satisfaction Policy Staff Report No. 33 Notes: 8. HRA discussion items Notes: 9. Executive Director Report Notes: 10. Claims and Payroll Adjournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the City Clerk at 612-861-9738. richfield: July 2012 Page 1 of 1 City of Richfield Calendar Calendars Net Navigate: 2011 Jan Feb Mar Air May Jun Jul Auq Sep Oc it Dec 2013 July 2012 Monday Tuesday Wednesday Thursday .Friday 25 I Jun 26 27 28 29 6:OOp Planning 6:OOp Special Joint SATURDAY,JUNE 30 Commission Study Meeting between 9:30 a.m.-10:30 a.m. Session Bloomington, Richfield, Mayor's Hour-Farmer's 7:OOp Planning and Edina Advisory Market Commission Boards of Health- Bartholomew Room 6:15p Special City Council Worksession 7:OOp City Council Regular Meeting 3 3 4 5 6 11:30a Tourism 7:OOp Transportation 7:OOp Arts Commission Promotion Board @ Commission- ©6335 Portland Ave 6601 Lyndale Ave,Suite CANCELED 106 CITY ADMINISTRATIVE 6:30p Human Rights OFFICES CLOSED— Commission FOURTH OF JULY HOLIDAY 9 10 11 12 13 6:15p Special City 8:OOa Civil Service Council Worksession Commission Meeting 7:OOp City Council Regular Meeting 16 17 18 19 :20 7:OOp Housing and 7:OOp Community 7:OOp Friendship City Redevelopment Services Commission© Commission Authority(HRA) 7000 Nicollet Ave CANCELED 23 24 25 26 27 7:OOp Planning 7:OOp City Council 7:OOp-8:OOp SATURDAY,JULY 28 Commission Regular Meeting Neighborhood Crime 9:30 a.m.-10:30 a.m. Watch Block Captains Mayor's Hour-Farmer's Meeting @ Richfield Market Middle School auditorium,7461 Oliver Ave. 30 31 1 I Aug 2 7:OOp Transportation 7:OOp Arts Commission Commission @ 6335 Portland Ave Display: Year Month Week Day Block List Condensed Abs Slide Calendars: Search Add Events: Daily Duration Periodic Administer: This Calendar All meetings held at City Hall(6700 Portland Avenue) unless indicated otherwise Calendars Net free online interactive web calendars http://www.my.calendars.net/richfield 7/12/2012 HOUSING AND REDEVELOPMENT � / AUTHORITY MEETING MINUTES g L � c Richfield, Minnesota Regular Meeting June 18, 2012 CALL TO ORDER The meeting was called to order by Chair Sandahl at 7:00 p.m. ROLL CALL HRA Members Sue Sandahl, Chair; Doris Rubenstein; Steven J. Quam; David Gepner Present: and Debbie Goettel Staff Present: Steven L. Devich, Executive Director; John Stark, Community Development Director; Karen Barton, Assistant Community Development Director; Christine Costello, Community Development Coordinator; Julie Eddington, HRA Attorney; and Nancy Gibbs, City Clerk Item #1 APPROVAL OF MINUTES OF (1) SPECIAL CITY COUNCIL/HRA/PLANNING COMMISSION WORKSESSION OF MAY 21, 2012; AND (2) REGULAR HRA MEETING OF MAY 21, 2012 M/Goettel, S/Rubenstein to approve the minutes of(1) Special City Council/HRA/Planninq Commission Worksession of May 21, 2012; and (2) Regular HRA Meeting of May 21, 2012. Motion carried 5-0. Item#2 HRA APPROVAL OF AGENDA M/Goettel, S/Gepner to approve the agenda. Motion carried 5-0. Item #3 CONSIDERATION OF REQUEST FOR SUBORDINATION OF HRA DEFERRED LOAN AT 6620 OAKLAND AVENUE S.R. NO. 23 Assistant Community Development Director Barton presented Staff Report No. 23. HRA Meeting -2- June 18,2012 M/Goettel, S/Rubenstein to approve request of subordination of HRA deferred loan at 6620 Oakland Avenue. Motion carried 5-0. Item#4 CONSIDERATION OF REQUEST FOR SUBORDINATION OF HRA TRANSFORMATION HOME LOAN AT 1300—73RD STREET WEST S.R. NO. 24 Assistant Community Development Director Barton presented Staff Report No. 24. Scott& Sang Hee Lindeberg, 1300—73`d Street West, were present to answer any questions. M/Gepner, S/Quam to deny the request for subordination of HRA Transformation Home Loan at 1300—73rd Street West. Motion carried 5-0. Item #5 CONSIDERATION OF SCHEDULING PUBLIC HEARING TO CONSIDER SALE OF 301-77TH STREET WEST(VACANT CANDLEWOOD PARCEL)AND CONSENT TO APPLICATION FOR COMPREHENSIVE PLAN AMENDMENT, CONDITIONAL USE PERMIT AND REZONING BY LAMETTRY'S COLLISION INC. S.R. NO. 25 Community Development Director Stark presented Staff Report No. 25. M/Sandahl, S/Gepner to approve scheduling public hearing to consider sale of 301 —77th Street West (vacant Candlewood parcel) and consent to application for comprehensive plan amendment, conditional use permit, and rezoning by LaMettrv's Collision Inc. Motion carried 5-0. Item#6 PUBLIC HEARING AND CONSIDER SALE OF HRA PROPERTY LOCATED AT 211 —76TH STREET WEST TO RICHFIELD PROPERTIES I, LIMITED PARTNERSHIP (DBA RON CLARK CONSTRUCTION AND DESIGN AND CONNELLY DEVELOPMENT)S.R. NO. 26 Executive Director Devich presented Staff Report No. 26. Ghislaine Ball, 7627 Harriet Avenue South, spoke against the project. Jim Susag, attorney representing Ron Clark Construction and Design and Connelly Development, requested that the HRA table Items#6 through 8 until the June 26th City Council Meeting and July 16th HRA Meeting. Holly Hanson, 7609 Harriet Avenue South, spoke against the project. Wendy Holland, 7245— 17th Avenue South, spoke against the project. HRA Meeting -3- June 18,2012 Luke Bonawitz, 7615 Garfield Avenue South#5, spoke against the project. Camillo DeSantis, 6508 Newton Avenue South, spoke in favor of the project. Joe Hoover, 7627 Harriet Avenue South, spoke against the project. Steph Miller, 6804 James Avenue South, spoke against the project. Mr. Susag stated that the HRA by-laws state that the applicant is supposed to be allowed to speak before the public hearing. He stated that their team just wants their due process. HRA Attorney Eddington stated she did not have a copy of the by-laws with her. Commissioner Quam asked if Mr. Susag had a copy of the by-laws with him. Mr. Susag responded that he did not have a copy with him but he said that he had read them. Chair Sandahl explained she would allow him to speak again without Commissioners Quam, Goettel, and Rubenstein's support to do so. However, this would also allow everyone else to speak again. Mr. Susag again asked that Items#6 through 8 be tabled. Ghislaine Ball, 7627 Harriet Avenue South, restated her concerns regarding the project. Holly Hanson, 7609 Harriet Avenue South, presented a diagram on TIF. Wendy Holland, 7245— 17th Avenue South, restated her concerns regarding the project. Joe Hoover, 7627 Harriet Avenue South, restated his concerns regarding the project. Luke Bonawitz, 7615 Garfield Avenue South#5, spoke on the Castille project where he currently lives. Dawn Christensen, 7109 Stevens Avenue South, spoke in opposition to the project. Steph Miller, 6804 James Avenue South, restated her concerns regarding the project. M/Goettel, S/Sandahl to close public hearing. Motion carried 5-0. Commissioner Quam stated that at the March 21, 2012 HRA Meeting the HRA discussed having a housing policy and deciding what the HRA wanted to support with this policy. He stated that Mr. Clark took the risk knowing the discussion was ongoing with our policy. He continued that the commissioners need to use their reasonable discretion and make a legislative decision on what is currently a good policy for Richfield. Commissioner Rubenstein agreed with Commissioner Quam. HRA Meeting -4- June 18,2012 M/Quam, S/Rubenstein to deny sale of HRA property located at 211 —76th Street West to Richfield Properties I, Limited Partnership (dba Ron Clark Construction and Design and Connelly Development). Motion carried 5-0. Item#7 CONSIDERATION OF CONTRACT FOR PRIVATE DEVELOPMENT WITH RICHFIELD PROPERTIES I, LIMITED PARTNERSHIP FOR PILLSBURY COMMONS DEVELOPMENT S.R. NO. 27 Executive Director Devich presented Staff Report No. 27. M/Goettel, S/Rubenstein to deny contract for private development with Richfield Properties I. Limited Partnership for Pillsbury Commons development. Motion carried 5-0. Item#8 CONSIDERATION OF RESOLUTION ADOPTING MODIFICATION TO REDEVELOPMENT PLAN FOR RICHFIELD REDEVELOPMENT PROJECT AREA AND TAX INCREMENT FINANCING PLAN FOR 2012-1 HOUSING TAX INCREMENT FINANCING DISTRICT(PILLSBURY COMMONS)S.R. NO. 28 Executive Director Devich presented Staff Report No. 28. M/Rubenstein, S/Quam to deny resolution adopting modification to redevelopment plan for Richfield redevelopment proiect area and tax increment financing plan for 2012-1 Housing Tax Increment Financing District (Pillsbury Commons). Motion carried 5-0. Item#9 HRA DISCUSSION ITEMS Commissioner Rubenstein thanked staff for keeping everyone fully informed on the Pillsbury Commons project. Item #10 EXECUTIVE DIRECTOR REPORT None. Item #11 CLAIMS AND PAYROLL M/Goettel, S/Quam that the following claims and payrolls be approved: HRA Meeting -5- June 18,2012 U.S BANK 06/18/2012, Section 8 Checks: 122017-122133 $ 155,607.57 HRA Checks: 31484-31507 $ 70,365.45 TOTAL $ 225,973.02 Motion carried 5-0. ADJOURNMENT The meeting was adjourned by unanimous consent at 8:41.m. _ Date Approved: July 16, 2012 Suzanne M. Sandahl Chair Nancy Gibbs Steven L. Devich City Clerk Executive Director AGENDA ITEM#: 3A REPORT#: 29 STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 16, 2012 REPORT PREPARED BY: JULIE URBAN,HOUSING SPECIALIST NAME,TITLE REPORT PRESENTER: KAREN BARTON,ASSISTANT COMMUNITY DEVELOPME '' DIRECTOR NAME,TITLE DEPARTMENT DIRECTOR REVIEW: "dr:REVIEWED BY EXECUTIVE DIRECTOR:z ITEM FOR HRA CONSIDERATION: Consideration of a contract with S.R. Stevens Excavating, Inc. for demolition at 6812 14th Avenue, 6438 Bloomington Avenue and 6315 16th Avenue. I. RECOMMENDED ACTION: By Motion: Approve the attached Contract for Demolition with S.R. Stevens Excavating, Inc. for demolition at 6812 14th Avenue, 6438 Bloomington Avenue and 6315 16th Avenue. II. BACKGROUND In 2012 the Housing and Redevelopment Authority (HRA) acquired properties at 6812 14th Avenue and 6438 Bloomington Avenue. The HRA plans to demolish the existing substandard structures and make the lots available for new home construction through the Richfield Rediscovered Program. In 2012 the City acquired the property at 6315 16th with federal airport grant funds and HRA funds. The HRA authorized the transfer of up to $55,000 from the Development Fund to pay for the acquisition and removal costs not covered by airport grant funds. The lot is located in the Cedar Corridor Redevelopment Area, and the HRA plans to demolish the existing structure and hold the lot for future redevelopment of the area. 7162012 Demolition Contract.doc HRA staff solicited bids for demolition of the houses and garages from eight companies. Five companies responded to the request submitting the following estimates: • S.R. Stevens, Inc. $23,997 • All Metro $27,960 • K.A. Kamish Excavation, Inc. $31,610 • Semple $35,673 • Frattalone $40,335 Staff recommends that the HRA approve a contract with S.R. Stevens Excavating, Inc. for the demolition work, to be completed by September 15, 2012. III. BASIS OF RECOMMENDATION A. POLICY • The HRA has demonstrated success through its Richfield Rediscovered Program in removing obsolete housing in poor condition and developing new housing that meets the needs of today's households. • Historically, the HRA has demolished existing homes prior to selling the properties. B. CRITICAL TIMING ISSUES • The houses are currently vacant. To reduce potential risks, holding costs, and negative impacts to the surrounding neighborhood, the houses should be demolished as soon as possible. • The Fire Department plans to use the houses for arson training in August and demolition should begin shortly after the training exercises are complete. • If the contract is approved, demolition will be completed by September 15, 2012. C. FINANCIAL • S.R. Stevens, Inc. submitted the lowest bid at$23,997. • There are funds available for the demolition in the Development Fund. D. LEGAL • Legal counsel drafted the Contract for Demolition. IV. ALTERNATIVE RECOMMENDATIONS) • Do not approve the Contract for Demolition. • Award the contract to another bidder. V. ATTACHMENTS • Contract for Demolition. VI. PRINCIPAL PAR'T'IES EXPECTED AT MEETING • N/A 3r\- I . CONTRACT FOR DEMOLITION OF 6812 14th Ave,6438 Bloomington Ave,6315 16th Avenue THIS CONTRACT is made and entered into this day of , 2012, by and between S.R. Stevens Excavating, Inc. (the "Contractor") and the Housing and Redevelopment Authority in and for the City of Richfield, State of Minnesota (the "HRA") (collectively, the "Parties"), for the demolition of buildings located at 6812 14th Avenue South, 6438 Bloomington Avenue South, and 6315 16th Avenue South, Richfield, MN 55423. RECITALS WHEREAS, the HRA requires the demolition of buildings at 6812 14th Avenue South, 6438 Bloomington Avenue South,and 6315 16th Avenue South(the"Work"). WHEREAS,the HRA has awarded the Work to the Contractor; WHEREAS, the Contractor represents that it has the necessary personnel, experience, competence, and legal right to perform the Work; NOW, THEREFORE, in consideration of the mutual obligations of the Parties hereto, each of them does hereby covenant and agree as follows: Section 1. Definitions "Asbestos" means any material containing more than one percent asbestos, which is friable, releasing asbestos fibers into the air, above current levels established by the United States Occupational Safety and Health Administration. "Contract" or "Agreement" means this agreement between the HRA and Contractor for the performance of the Work, together with all exhibits, amendments, or modifications to the Contract. "Destructive Report" means a hazardous materials abatement inventory prepared to assist in establishing the scope of the Work. "Final Completion"means all items of the Work, "punch list items" and site work are completed and Contractor is eligible for Final Payment. "Hazardous Materials" means asbestos, PCBs, petroleum hazardous waste, radioactive material, or any other hazardous materials or hazardous wastes within the meaning of City, State of Minnesota, or Federal definitions of hazardous materials or hazardous waste. "Owner" means the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota. 314396v2 MTN RC125-1 1 "Property" means 6812 14th Avenue South, 6438 Bloomington Avenue South, and 6315 16th Avenue South, Richfield, MN 55423. "Substantial Completion" means the time at which the HRA determines that the Work has progressed to a point where it is sufficiently complete, leaving only minor"punch list" and close out items and other minor site work required to be completed for full payment of the contract price. "Work" means the entire completed demolition, and all other activities to be performed by Contractor on the Property as provided for in the Contract. Section 2. General Requirements 2.1. Rights of the HRA. The HRA and the City reserve the right to reject any or all proposals or parts of proposals, to accept part or all of proposals on the basis of considerations other than lowest cost, and to create a project of lesser or greater expense and reimbursement than described in this Contract. The HRA also reserves the right to cancel the Contract without penalty, if circumstances arise which prevent the HRA from completing the project. In the event of any conflict between the General Conditions and this Contract,this Contract shall control. 2.2. Interest of Members of City or HRA. The Contractor agrees that no member of the governing body, officer, employee, or agent of the City or the HRA shall have any interest, financial or otherwise, direct or indirect, in the Contract. 2.3. Equal Opportunity Statement. Contractor agrees to comply with the provisions of all applicable federal, state, and City of Richfield statutes, ordinances, and regulations pertaining to civil rights and nondiscrimination including without limitation Minnesota Statutes, Section 181.59 as amended, incorporated herein by reference. 2.4. Transfer of Interest. The Contractor shall not assign any interest in the Contract, and shall not transfer any interest in the same either by assignment or novation, without the prior written approval of the HRA, provided, however, that claims for money due or to income due to the Contractor may be assigned to a bank, trust company, or other financial institution, or to a Trustee in Bankruptcy without such approval. Notice of any such assignment or transfer shall be furnished to the HRA. Notwithstanding the foregoing, Contractor shall be entitled to use subcontractors to perform the Work. 2.5. Independent Contractor. Nothing contained in this agreement is intended to, or shall be construed in any manner, as creating or establishing the relationship of employer/employee between the parties. The Contractor shall at all times remain an independent contractor with respect to the services to be performed under this agreement. The HRA shall be exempt from payment of all Unemployment Compensation, FICA, retirement, life and/or medical insurance and Workers Compensation Insurance as the Contractor is an independent contractor. 314396v2 MTN RC125-1 2 2.6. Hold Harmless. The Contractor agrees to defend, indemnify and hold harmless the HRA and the City , its officers and employees, from any liabilities, claims, damages, costs,judgments, and expenses, including attorney's fees, resulting directly or indirectly from an act or omission of the contractor, its employees, its agents, or employees of subcontractors, in the performance of the services provided by this contract or by reason of the failure of the contractor to fully perform, in any respect, all of its obligations under this Contract. 2.7. Accounting Standards. The Contractor agrees to maintain the necessary source documentation and enforce sufficient internal controls as dictated by normally accepted accounting practices to properly account for expenses incurred under this contract. 2.8. Retention of Records. The Contractor shall retain all records pertinent to expenditures incurred under this Contract for a period of three years after the resolution of all audit findings. Records for non-expendable property acquired with funds under this contract shall be retained for three years after final disposition of such property. 2.9. Disclosure. The Contractor agrees to comply with the Minnesota Government Data Practices Act, Minnesota Statutes, Chapter 13, and all other applicable state and federal laws relating to data privacy or confidentiality, as those laws may be amended. The Contractor shall immediately report to the HRA any requests from third parties for information relating to this agreement. All data created, collected, received, stored,used, maintained, or disseminated by the Contractor in performing its obligations is subject to the requirements of the Act, and the Contractor must comply with those requirements as if it were a government entity. The HRA agrees to promptly respond to inquiries from the Contractor concerning data requests. The Contractor agrees to hold the City and the HRA, its officers, department heads and employees harmless from any claims resulting from the Contractor's failure to disclose data maintained by the Contractor and authorized for release by the HRA, and from Contractor's unlawful disclosure or use of data protected under state and federal laws. Section 3. Contract Price 3.1. Upon compliance with all the requirements of this Contract, Contractor shall be paid the Contract Price of$23,997,pursuant to Section 28 of this Contract. Section 4. Project Schedule 4.1. Contractor shall commence the Work after contract execution and Substantial Completion of the Work shall be achieved no later than September 15, 2012 60 days thereafter. Section 5. Local Permit Requirements and Related Submittals 5.1. Contractor shall obtain permits required by the City of Richfield, including a plumbing permit (for water & sanitary sewer disconnects) and a demolition permit. 314396v2 MTN RC125-1 3 3/1®14 Questions about these permits, permit fees, and the scheduling process for the required inspections should be directed to the Building Inspections Department at the Richfield Municipal Center(612-861-9816). The Owner shall provide evidence of a Destructive Report and subsequent Hazardous Materials Abatement for each property. 5.2. No less than 2 days prior to beginning the Work,the Contractor shall provide: - Description of proposed dust and noise control measures for the Property. 5.3. Upon completion of the Work, Contractor shall provide: - Copies of any permits required by government agencies other than the City of Richfield, such as transport or disposal permits. - Copies of any test results required by government agencies other than the City of Richfield, including but not limited to testing required as part of the asbestos abatement process. - Copies of all landfill records indicating receipt and acceptance of hazardous wastes by a landfill licensed to accept hazardous wastes. Section 6. Job Conditions- General 6.1. Contractor will disconnect and abandon utilities serving the Property, including water, sanitary sewer, electricity, gas and telecommunications; or arrange for disconnection and abandonment of same. Contractor shall not begin work before field- verifying that disconnection and abandonment has been completed. 6.2. Owner shall ensure that the buildings will be vacated and use of the property will be discontinued prior to start of work. 6.3. Owner assumes no responsibility for actual condition of structures to be demolished. Conditions existing at time of inspection for bidding purposes will be maintained by Owner to the extent practicable. Contractor may salvage any and all materials and equipment from the Property. Variations within structures may occur due to removal and salvage operations prior to the start of demolition work. 6.4. This is a lump sum contract. Contractor must immediately contact Owner prior to exceeding the Contract Price set out in Section 3.1. Change orders for additional payment will not be granted due to the Contractor underestimating quantities of material(s). 314396v2 MTN RC125-1 4 6.5. Contractor shall provide all labor, materials, equipment, employee training, compliance with all regulations, permits, notifications, licenses and agreement necessary to perform the work described in this Contract. 6.6. All materials from undertaking the Work shall become the property and responsibility of the Contractor. 6.7. Contractor may choose to salvage materials and equipment. Any salvaged items must be removed from the Property in a timely manner as they are salvaged. On site storage or sale of salvaged items is prohibited. 6.8. The use of explosives and on site burning by the Contractor are prohibited. 6.9. Contractor shall provide water, electricity, communications and toilet facilities on site as necessary to complete the work. 6.10. Contractor shall provide and maintain uninterrupted vehicular access to the Property, including temporary demolition facilities, storage and work areas, for not only persons and equipment involved in the project but also emergency vehicles. 6.11. Contractor shall keep fire hydrants and water control valves free from obstruction and accessible for use. 6.12. Contractor shall take all necessary safeguards to prevent damage or injury to neighboring property. 6.13. Prior to closing or rerouting existing traffic lanes or sidewalks in any public street easement or right-of-way adjacent to streets, the Contractor shall obtain written permission from the City Engineer. Expenses related to lane closures, including but not limited to traffic barriers, signs and similar equipment as well as traffic control personnel, shall be the responsibility of the Contractor. Section 7. [Left Blank] Section 8. [Left Blank] Section 9. Demolition 9.1 Owner has not conducted any testing to determine the extent of lead based paint. Contractor shall conduct demolition in compliance with any state or federal regulations governing demolition of structures containing lead based paint. 9.2. Contractor shall use water sprinkling, temporary enclosures and other suitable methods to limit dust and dirt rising and scattering in air. Contractor shall comply with any and all governing regulations pertaining to environmental protection. Contractor 314396v2 MTN RC125-1 5 shall not use water when it may create hazardous or objectionable conditions such as flooding or pollution. 9.3. Contractor shall clean adjacent structures and improvements of dust, dirt and debris caused by demolition operations and return adjacent areas to condition existing prior to start of work. 9.4. Contractor shall demolish buildings, other structures, improvements, and landscaping completely and remove all debris from the Property. Contractor may use such methods as required to complete the work subject to the limitations of governing regulations. 9.5. Contractor shall proceed with demolition in a systematic manner, from top of structures to ground, and will complete demolition work above each floor or tier before disturbing supports on lower levels. 9.6. Contractor shall locate demolition equipment throughout the building and remove materials so as to not impose excessive loads to supporting walls, floor or framing. 9.7. Contractor shall provide and maintain interior and exterior shoring, bracing or other structural support to preserve structural stability and prevent movement, settlement or collapse of the building. 9.8. Contractor shall break up any concrete slabs-on-grade and remove from the Property. 9.9. Contractor shall demolish footings, foundation walls, tunnels and other below- grade structures and remove from the Property. 9.10 Contractor shall provide certificate of well abandonment if required. Section 10. Debris Control 10.1. Contractor shall maintain the Property free of extraneous debris. 10.2. Contractor shall prohibit overloading of trucks to prevent spillage on access and haul routes. 10.3. Contractor shall maintain a sweeping and clean-up program to prevent deposition, release and disbursal of soils and debris onto paved surfaces. 314396v2 MTN RC125-1 6 Section 11. Disposal 11.1. Contractor shall move from the Property all debris, rubbish and other materials resulting from demolition operations. 11.2. Contractor shall transport materials from the Property and legally dispose of them off-site in accordance with governing regulations. Section 12. Earthwork 12.1. Contractor shall rough grade the Property using clean fill after completing all abatement and demolition activities; taper edges of all excavated areas to minimize slope of 2 to 1,keeping soil disturbance to a minimum. Section 13. Excusable Delays 13.1. The following circumstances, and only these circumstances, will, at the HRA's discretion, be considered legitimate cause for a change in the commencement and/or completion dates specified in Section 4 of this Agreement: a. Material delay -- material delays that are beyond the control of the Contractor, which can be shown to have directly caused the overall late completion. b. Adverse weather and emergency conditions -- weather or emergency conditions that directly affect the scheduling of exterior work over a significant portion of the term of this Agreement. c. Strikes -- Contractors who face union work stoppage in the case where they have to rely on such a work force in order to complete the Work. d. Amendments -- amendments in the original scope of work, which can be reasonably shown to require an extension of the time allowed for completion. e. Other delays—act or neglect of the Owner, or of an employee of either, or of a separate contractor employed by the Owner, or by changes ordered in the Work or by unavoidable casualties or other causes beyond the Contractor's control. Section 14. Change Order 14.1. The HRA shall have the right, within the general scope of the Work and without notice to any surety or sureties of the Contractor, if any, to make changes in the Work, either by altering the nature of the same or by adding to or deducting from it. All changes shall, except in the case of emergencies endangering the safety of persons or property, be 314396v2 MTN RC125-1 7 311 -g made by written Change Order. The parties shall determine the effect of any Change Order on the Contract Price and project schedule by mutual agreement. The Contractor shall promptly comply with any and all written Change Orders. No such Change Order shall be deemed to invalidate the remaining terms and conditions contained in the Contract. Section 15. Waiver of Liability 15.1 It is agreed that the Work is undertaken at the sole risk of the Contractor. The Contractor does expressly forever release the HRA and the City of Richfield from any claims, demands, injuries, damage actions, or causes of action whatsoever, arising out of or connected with the Work. Section 16. Indemnification 16.1. Any and all claims that arise or may arise as a consequence of any act or omission on the part of the Contractor, its agents, servants, or employees while engaged in the performance of the Work shall in no way be the obligation or responsibility of the HRA or the City of Richfield. The Contractor shall indemnify, hold harmless, and defend the HRA and the City of Richfield, its commissioners, council members, officers, employees, successors, and assigns against any and all liability, loss, cost, damages, expenses,claims, or actions, including attorney's fees which the HRA and the City of Richfield, its commissioners, council members, officers, or employees may hereinafter incur or be required to pay on account of injury to or death of any person or persons or damage to any property arising out of or by reason of any act or omission of the Contractor, its agents, servants, or employees in the execution, performance, or failure to adequately perform its obligations under this Agreement, whatever the cause of such injuries or damage. Section 17. Insurance 17.1. The Contractor agrees that in order to protect itself, the HRA, and the City of Richfield under the indemnity provisions set forth in Section 16 of this Agreement,it will at all times during the term of this Agreement, maintain, at a minimum, the following insurance policies: a. Workers Compensation Insurance. The Contractor shall maintain worker's compensation insurance in compliance with all applicable statutes including Chapter 176 of the Minnesota Statutes. Such policy shall include Employer's Liability Coverage and at least such amount(s) as are customarily provided in worker's compensation policies issued in Minnesota. Contractor further agrees to require all subcontractors and independent contractors to maintain worker's compensation insurance in compliance with all applicable statutes and to monitor the compliance of such subcontractors and independent contractors with the applicable statutes. 314396v2 MTN RC125-1 8 3,1-9 b. Commercial General Liability Insurance. The Contractor shall maintain Occurrence Based Commercial General Liability Insurance ("CGL"), providing coverage on an "occurrence", rather than on a "claims made" basis, which policy shall include coverage for the Completed Operations Hazard, and which shall also include a Broad Form General Liability Endorsement, ISO number GL 0404, or an equivalent form (or forms), so long as such an equivalent form(or forms) affords coverage which is in all material respects at least as broad. Any equivalent form (or forms) of coverage shall be approved by the HRA. The Contractor agrees to maintain total liability policy limits of at least One Million Dollars ($1,000,000), applying to liability for Bodily Injury, Personal Injury, and Property Damage, which total limits may be satisfied by the limits afforded under its Occurrence Based CGL policy as specified above, or by such policy in combination with the limits afforded by an Umbrella Liability Policy (or policies) provided, however, that the coverage afforded under any such Umbrella Liability Policy shall be at least as broad as that afforded by the underlying occurrence based CGL Policy as specified above. c. Automobile Liability Insurance. The Contractor shall maintain automobile liability insurance covering liability for Bodily Injury and Property Damage arising out of the ownership, use, maintenance, or operation of all owned, non-owned, and hired automobiles and other motor vehicles. Such policy shall provide total liability limits for combined Bodily Injury and/or Property Damage in the amount of at least One Million Dollars ($1,000,000) per accident, which total limits may be satisfied by the limits afforded under such policy, or by such policy in combination with the limits afforded by an Umbrella Liability Policy (or policies) provided, however, that the coverage afforded under any such Umbrella Liability Policy shall be at least as broad as that afforded by the underlying automobile liability insurance policy. The HRA and the City of Richfield shall be named as "additional insured" parties with respect to the insurance policies specified in (b) and (c) above. The Contractor shall not commence work until a Certificate of Insurance evidencing all of the insurance policies required above is approved and a written Notice to Proceed is issued by an authorized representative of the HRA. The HRA shall, at any time during the term of this agreement, have the right to require that the Contractor secure any additional insurance, or additional feature to existing insurance, as the HRA may reasonably require for the protection of its interests or those of the public. It is expressly understood that the HRA does not in any way represent that the minimum insurance coverage set forth in this paragraph is sufficient or adequate to protect the interest or liabilities of the Contractor. Section 18. Bond 314396v2 MTN RC125-1 9 3-) 0 18.1. No payment or performance bonds for the Work shall be required pursuant to Minn. Stat. § 574.26. Section 19. Lien Waiver 19.1. Neither the Contractor nor any subcontractor or other person or entity furnishing labor, equipment, or materials in connection with the Work shall file any mechanic's lien against the HRA's buildings, structures or land or any part thereof,provided that the HRA makes all payments due to Contractor under this Contract. The Contractor shall protect, defend, indemnify, and hold harmless the HRA and the City of Richfield from any and all claims, demands, or actions of whatever nature arising out of work, labor, equipment, or materials furnished by the Contractor or its subcontractors in connection with the Work, provided that the HRA makes all payments due to Contractor under this Contract. Payment of the Contract Price shall not be due until the Contractor has delivered to the HRA lien waivers acceptable to the HRA, which release the HRA from all liens that may arise in connection with the Work. The Contractor shall list on the attached Exhibit A the names of all suppliers and/or subcontractors that will provide materials, services, or labor in connection with the Work. The Contractor will notify the HRA of any changes in this list prior to the commencement of the Work. Section 20. Subcontractors 20.1. Contractor agrees to bind every subcontractor by the terms, conditions, and provisions set forth in the Contract that are applicable to the subcontractor's work, unless otherwise specifically agreed otherwise in writing by the HRA. 20.2. Contractor agrees to pay every subcontractor within 10 days of receipt of payment from the HRA pursuant to Minn. Stat. § 471.425. Section 21. Assignment 21.1. This Contract shall be binding upon the Contractor, its legal representatives,heirs, successors, and assigns. No assignment or attempted assignment of this Contract or any rights hereunder shall be effective unless the written consent of the HRA is first obtained. No such assignment, even if consented to by the HRA, shall relieve the Contractor from liability under this Contract for the performance and completion of the Work in accordance with the Contract. Notwithstanding the foregoing, Contractor shall be entitled to use subcontractors to perform the Work. Section 22. Entire Agreement 22.1. The Contract contains all the terms, conditions, and provisions pertaining to the Work to be completed by the Contractor, there being no other understandings, agreements, or warranties, express or implied. All prior negotiations and dealings regarding the subject matter of the Agreement are superseded by and merged into the Contract. 314396v2 MTN RC125-1 10 3A- II Section 23. Applicable Law 23.1. This Contract shall be construed in accordance with and governed by the laws of the state of Minnesota. Section 24. Amendment 24.1. This Contract may be modified or amended only with the written approval of the HRA and the Contractor. Section 25. Construction 25.1. In the event that any one or more of the provisions of this Contract, or any application thereof, shall be found to be invalid, illegal, or otherwise unenforceable, the validity, legality, and enforceability of the remaining provisions or any application thereof shall not in any way be affected or impaired thereby. Section 26. Authority 26.1. Each of the undersigned parties warrants that it has the full authority to execute this Contract, and each individual signing this Contract on behalf of a corporation hereby warrants that he or she has full authority to sign on behalf of the corporation and that he or she represents and binds such corporation thereby. Section 27. Waiver 27.1. No failure by the HRA to insist upon the strict performance of any covenant, duty, agreement, or condition contained in this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, agreement, term, or condition, nor does it imply that such covenant, agreement,term, or condition may be waived again. Section 28. Payments to Contractor and Completion 28.1. The Contractor shall be paid upon completion of the Work in accordance with the payment schedule of the HRA, if any, and this section. 28.2. Application for Payment. Prior to receiving payment for Substantial Completion of the Work, the Contractor shall in writing state that the respective portion of the Work has been substantially completed and is free and clear of all liens as provided in this Contract. Upon Substantial Completion and inspection and verification by the HRA, the payment for that portion of the Work shall be made. Final payment shall be made when Contractor certifies that Final Completion has been achieved and verified by the HRA. 314396v2 MTN RC125-1 11 IN WITNESS WHEREOF, the parties have caused this Contract to be duly executed in their names and behalves and on or as of the date and year first above written. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By Suzanne M. Sandahl Its Chair By Steven L. Devich Its Executive Director 314396v2 MTN RC125-1 12 3k1 — ► 3 CONTRACTOR By Its By Its THIS INSTRUMENT DRAFTED BY: Richfield Housing and Redevelopment Authority in and for the City of Richfield 6700 Portland Avenue South Richfield, MN 55402 (612) 861-9760 314396v2 MTN RC125-1 13 3A - iq EXHIBIT A LIST OF SUPPLIERS AND SUBCONTRACTORS 314396v2 MTN RC125-1 A-1 AGENDA ITEM#: 4 REPORT#: 30 STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 16, 2012 REPORT PREPARED BY: JULIE URBAN,HOUSING SPECIALIST NAME TIME REPORT PRESENTER: KAREN BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR NAME THLE DEPARTMENT DIRECTOR REVIEW: El ,_.____..., ...k. „marit . REVIEWED BY EXECUTIVE DIRECTOR: ' i 6-, irgir : , ITEM FOR HRA CONSIDERATION: Consideration of a request for a subordination of a Housing and Redevelopment Authority Transformation Loan at 6415 2nd Avenue. I. RECOMMENDED ACTION: By Motion: Approve or deny the request for a subordination of a Housing and Redevelopment Authority Transformation Home Loan at 6415 2nd Avenue. II. BACKGROUND Bradley and Mary Ann Fink (Homeowner) of 6415 2nd Avenue have requested a subordination of a $10,467 Transformation Home Loan they received from the Housing and Redevelopment Authority (HRA) on April 25, 2000. At 102 percent, the combined loan-to-value ratio exceeds the HRA Subordination and Satisfaction Policy limit of 80 percent and was therefore denied by staff. The Homeowners are appealing the denial and have asked that their request be brought to the HRA for consideration. The Homeowners qualify for and are pursuing a refinance through the federal Home Affordable Refinance Program (HARP). HARP is a streamlined refinance program that allows property owners who are impacted by decreased property values and 07162012 Fink(6415 2nd)subordination appeal.doc who have an FHA-insured mortgage the opportunity to refinance their mortgage to secure better terms and help stabilize the housing markets in the United States. The Homeowners would like to refinance their primary mortgage into a new mortgage of$169,700, which includes the total balance of the first mortgage ($164,279) and settlement charges ($5,279). The interest rate would be reduced from 5.5 percent to 4.125 percent resulting in a savings of$235.55 per month. The term of the loan will be 30 years. Although the refinance reduces the interest rate and monthly payments, the combined loan-to-value ratio is above the HRA's Subordination and Satisfaction Policy limit of 80 percent (85% under administrative appeal guidelines). Although the superior debt to the HRA's lien is increasing, it is within the 50 percent increase permitted under the Subordination and Satisfaction Policy guidelines. The request meets all other requirements of the guidelines: property taxes are current, no equity is being removed, closing costs are 1.7 percent, payment terms are within the financial means of the homeowners, and no other subordinations have been granted in the past five years. III. BASIS OF RECOMMENDATION A. POLICY According to the HRA Subordination and Satisfaction Policy: • The total debt secured by the property, including the HRA lien and all superior mortgages, shall not exceed 80 percent of the documented market value of the property. A staff-authorized administrative appeal of the Policy can be granted if the loan-to-value ratio does not exceed 85 percent or if the amount of superior debt does not increase. • The overall value of superior debt must not be increased by more than 50 percent. • Closing costs do not exceed three percent (1.7%). • Payment terms are within the financial means of the borrower. • Equity being removed must be no more than $5,000 or must be for qualified home improvements. • Property taxes must be current. • No more than one subordination has been granted to the loan within the past five years. B. CRITICAL ISSUES • The combined loan-to-value ratio is 102 percent. • The amount of debt in front of the HRA lien increases three percent from $164,279 to $169,700. The closing costs and pre-paid escrow costs are being rolled into the principal mortgage. The homeowners are unable to pay cash for these costs. • The refinancing will lower the primary loan's interest rate and will reduce the amount of the monthly payments by $235.55 a month. The refinance will improve the homeowners' ability to continue to pay the mortgage payments. • The HARP program does not require an appraisal; however, the estimated value is $176,815. • The Hennepin County 2012 estimated market value for taxes payable 2013 is $197,000. C. FINANCIAL • The application fee has been received for the appeal request. D. LEGAL • N/A IV. ALTERNATIVE RECOMMENDATION(S) • Approve the subordination request. • Approve the subordination request with financial counseling as a contingency of the approval. • Deny the subordination request. V. ATTACHMENTS • Appeal Letter VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Bradley and Mary Ann Fink, homeowners 4— I 3316 West 66th Street Suite100 Edina,Minnesota 55435 • phone 952.831,8253 fax 952.831.8254 p eo p1 esba n k www.e-peoplesbank.com OF COMMERCE July 5, 2012 Richfield HRA Attn:Julie Urban 6700 Portland Avenue South Richfield,MN 55423 Dear Ms. Urban: 1:am writing to appeal the rejection,of the subordina ion request for Bradley and Mary Ann Fink. Through no fault of their own,the Finks home has decreased in value due to the market, and they do not have the funds to pay for their closi g costs out of pocket Therefore, I am requesting that we be allowed to include these in th- new loan. We are doing a HARP loan for them. Below,you will see the benefits to the new I.an,which in turn will also benefit you. • Reduction of interest rate from their current of 5.5%to 4.125%,which means that they will be paying off their principle balance at a aster rate. • The monthly savings for the borrower is$23 .55. • "Actual"closing costs are approximately$28:2.78.These will be recouped by the borrower within approximately 13 months b the monthly savings alone. • The remaining addition to their loan is escro setup/prepaid interest. 1 ask that you reconsider the request to subordinate to our new loan. As you can see,there is a great benefit to these clients. The monthly savings I substantial, and can be life-changing. Enclosed you will find a check in the amount of$12 .00 for the appeal request. Please let me know if you have any questions or concerns. Thank ou for your time and consideration. Sincerely, 10 ipt,w6ca Melissa M. Filas Loan Processor Peoples Bank of Commerce 3316 66th St,Ste 100 Edina, MN 55435 AGENDA ITEM#: 5 REPORT#: 31 Imailli STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 16, 2012 REPORT PREPARED BY: CHRISTINE COSTELLO, COMMUNITY DEVELOPMENT SPECIALIST NAME,TITLE REPORT PRESENTER: JOHN STARK, COMMUNITY DEVELOPMENT DIRECTOR N TITLE DEPARTMENT DIRECTOR REVIEW: P fill REVIEWED BY EXECUTIVE DIRECTOR: G' -?'' if i it ITEM FOR HRA CONSIDERATION: Consideration of proposed sale of land to LaMettry's Collision, Inc. I. RECOMMENDED ACTION: By Motion: • Hold a public hearing with respect to sale of Housing and Redevelopment Authority property located at 301 West 77th Street; and • Approve the Purchase Agreement for the sale of Housing and Redevelopment Authority property located at 301 West 77th Street to LaMettry's Collision, Inc. II. BACKGROUND The Richfield Housing and Redevelopment Authority (HRA) has owned 301 West 77th Street, often referred to as the vacant Candlewood parcel, since 1992. The parcel was originally part of a larger tract of land that had been a lumber yard. In 1998 the land was platted into two parcels and the southerly portion was sold to Candlewood Suites for the development of a hotel. The remaining parcel, retained by the HRA, has been vacant since the HRA's acquisition in 1992. 07162012-PH Purchase Agreement 301 W 77th St.doc Richfield Bloomington Honda (RB Honda) had previously expressed interest in the site for an electric vehicle dealership. Since that time, RB Honda has met with LaMettry's Collision, Inc. (LaMettry's) (located immediately to the west of RB Honda), to discuss purchasing LaMettry's current property to allow for the expansion and updating of the facility. This would allow RB Honda to meet Honda Corporation's dealership requirements and to remain competitive in the Honda market in the Twin Cities. LaMettry's has indicated a willingness to sell their property to RB Honda on the condition they would be able to purchase the HRA property for the development of a new facility. At the November 21, 2011 HRA worksession, Rick LaMettry presented a proposal to purchase the vacant Candlewood lot for the development of a new collision- repair facility. At the worksession RB Honda stated they would be willing to opt out of their proposal for the site to allow for the sale to LaMettry's. Members of the HRA stated they would like to see and hear more information about this project. Based on the HRA's view of the project at their November 2011 worksession, LaMettry's moved forward in the land use application process. The HRA approved a consent to allow LaMettry's to submit this land use application at the June 18, 2012 HRA meeting. On June 25th, the Planning Commission held a public hearing for the consideration of a Comprehensive Plan Amendment and a Planned Unit Development (PUD) and voted 6 to 0 to approve the amendment and PUD. The City Council held its first reading of the rezoning at their June 26th meeting and on July 10th the Council will consider the Comprehensive Plan Amendment, PUD, and second reading of the rezoning. The land use approvals are contingent on the HRA selling the land to LaMettry's. Furthermore, the Purchase Agreement is contingent on LaMettry's selling their property to RB Honda. III. BASIS OF RECOMMENDATION A. POLICY • A public hearing is required prior to the HRA agreeing to sell property it owns. • The HRA must decide whether it is in the best interest of the public to sell the property under the terms offered. B. CRITICAL TIMING ISSUES • The closing of the property is contingent on if RB Honda will purchase the property upon which LaMettry's is currently operating and that RB Honda will move forward with its plans to build a larger facility on such property and adjacent properties (See 3e of Purchase Agreement). C. FINANCIAL • The proposed Purchase Agreement provides for a purchase price of $675,000. • LaMettry's will be required to submit earnest money at the time of the closing date in the amount of$33,750. • The appraisal for the property (dated April 9, 2012) estimates the market value at approximately$675,000. This appraisal assumes Regional Commercial/Office (RCO). The use of the land as RCO is based on the assumption that the Comprehensive Plan will be amended to fit this designation. On July 10th the City Council will vote to amend the Comprehensive Plan to Community Commercial/Office, allowing for LaMettry's use. D. LEGAL • The HRA's legal counsel has drafted the proposed Purchase Agreement. IV. ALTERNATIVE RECOMMENDATIONS) • Continue the consideration of a motion of the proposed sale of 301 77th Street West (vacant Candlewood parcel) to LaMettry's Collision Inc. • Deny the consideration of a motion of the proposed sale of 301 West 77th Street (vacant Candlewood parcel) to LaMettry's Collision, Inc. V. ATTACHMENTS • Purchase Agreement • Map VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Representative(s) of LaMettry's Collision, Inc. 5- I Draft June 7,2012 PURCHASE AGREEMENT THIS AGREEMENT is made as of this day of , 2012, by and between the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, a public body corporate and politic under the laws of the State of Minnesota ("Seller") and LaMettry's Collision, Inc., a Minnesota corporation, or its assigns ("Buyer"). RECITALS A. Seller is the owner of property which is legally described on the attached Exhibit A("Property"). B. Buyer wishes to purchase the Property in accordance with the provisions of this Agreement. AGREEMENT 1. Offer/Acceptance for Sale of Property. The Seller agrees to sell to the Buyer the Property and the Buyer agrees to purchase the same,according to the terms of this Agreement. 2. Purchase Price for Property and Terms. A. PURCHASE PRICE: The total Purchase Price for the Property is $675,000.00(the"Purchase Price"). B. TERMS: (1): EARNEST MONEY. The sum of $33,750.00 Earnest Money is paid herewith by the Buyer to the Seller. The balance of the Purchase Price shall be due on the date of closing (the"Closing Date") (2): BALANCE DUE SELLER: Buyer agrees to pay by electronic transfer of funds on the Closing Date any remaining balance due according to the terms of this Purchase Agreement. (3): DEED/MARKETABLE TITLE: Subject to performance by Buyer, Seller agrees to execute and deliver a Quitclaim Deed conveying title to the Property to Buyer, subject only to the following exceptions: a. Building and zoning laws, ordinances, state and federal regulations; 1 401090v5 JAE RC125-323 b. Reservation of minerals or mineral rights to the State of Minnesota, if any; c. Public utility and drainage easements of record which will not interfere with Buyer's intended use of the Property; and d. A Cross Access Easement Agreement, dated June 22, 1998 (the "Easement Agreement"), between the Seller and Candlewood Minneapolis, MN LLC. (4): DOCUMENTS TO BE DELIVERED AT CLOSING BY SELLER. In addition to the deed required at paragraph 2B(3) above, Seller shall deliver to the Buyer: a. Standard form Affidavit of Seller. b. A"bring-down" certificate, certifying that all of the warranties made by Seller in this Purchase Agreement remain true as of the Closing Date. c. Certificate that Seller is not a foreign national. d. Well disclosure certification,if required,or,if there is no well on the Property, the Deed given pursuant to paragraph 2B(4) above must include the following statement: "The Seller certifies that the Seller does not know of any wells on the described real property." e. Any other documents reasonably required by the Buyer's title insurance company or attorney to evidence that title to the Property is marketable and that Seller has complied with the terms of this Purchase Agreement. 3. Contingencies. Seller's obligation to sell, and Buyer's obligation to buy is contingent upon the following: a. Buyer's determination of marketable title pursuant to paragraph 4 of this Agreement; b. Buyer's determination, in its sole discretion, that the results of the environmental investigation under this Agreement are satisfactory to Buyer; c. Successful rezoning of the Property to Buyer's intended commercial use; d. If deemed necessary by the Buyer, the Buyer's ability to satisfactorily renegotiate the Easement Agreement(as described in Section 14 hereof); 2 401090v5 JAE RC125-323 e. Satisfactory evidence that Richfield Honda will purchase the property upon which the Buyer currently operates and that Richfield Honda will move forward with its plans to build a larger facility on such property and adjacent properties; f. Approval of this Agreement by the Board of Commissioners of the Housing and Redevelopment Authority in and for the City of Richfield (the"Board"); and g. The Board conducting a public hearing on the sale of the Property and approving such sale by resolution. Buyer and Seller shall have until the Closing Date to remove the foregoing contingencies. The contingencies listed in 3a, 3b, 3c, and 3d above are solely for the benefit of Buyer and may be waived by Buyer. The contingency listed in 3e above is solely for the benefit of Seller and may be waived by Seller. The contingencies listed in 3f and 3g may not be waived by either party. If one or more of Buyer's or Seller's contingencies is not satisfied, or is not satisfied on time, and is not waived, this Purchase Agreement shall thereupon be void at the written option of either party. In such event, Seller shall return the Earnest Money to Buyer, and Buyer and Seller shall execute and deliver to each other a termination of this Purchase Agreement. As a contingent Purchase Agreement, the termination of this Agreement is not required pursuant to Minnesota Statutes, Section 559.21, et.seq. 4. Title Examination/Curing Title Defects. The Buyer shall, at its expense and within a reasonable time after Seller's acceptance of this Agreement,obtain a commitment for title insurance ("Commitment") for the Property. The Buyer shall have ten (10) business days after receipt of the commitment and executed Purchase Agreement to examine the same and to deliver written objections to title, if any, to Seller, or Buyer's right to do so shall be deemed waived. Seller shall have the option, but not the obligation, until the Closing Date (or such later date as the parties may agree upon)to cure such objections, at the Seller's cost. In the event that Seller elects not to undertake a cure, or in the event title to the Property cannot be made marketable or is not made marketable by the Seller by the Closing Date, then, unless Buyer elects to proceed to closing without a cure to the objections, this Agreement may be terminated by either party. 5. Inspections; Environmental Investigation. From the date of this Agreement to the Closing Date, Buyer, its employees and agents, shall be entitled to enter upon the Property to conduct such surveying, inspections, investigations, soil borings and testing, and drilling, monitoring, sampling and testing of groundwater monitoring wells and conducting such other environmental examination and tests as Buyer deems necessary; provided, that Seller is given at least 48 hours' notice to Seller. Buyer shall promptly pay, before any lien attaches, all charges for costs incurred in connection with the work permitted under this Paragraph. Buyer agrees to indemnify the Seller against any liens, claims, losses, or damage occasioned by Buyer's exercise of 3 401090v5 JAE RC125-323 5- 1 its right to enter and work on the Property. Buyer agrees to provide Seller with a copy of any report as a result of such examination and tests. 6. Real Estate Taxes, Special Assessments, and Special Service District Charges. Real estate taxes, installments of special assessments, if any, and charges related to the Special Service District known as the Interstate/Lyndale/Nicollet Maintenance Area or the 77th Street Maintenance District payable in the year of closing will be pro-rated between the Buyer and Seller to the Closing Date. Seller shall pay all real estate taxes, installments of special assessments, and charges related to the Special Service District known as the Interstate/Lyndale/Nicollet Maintenance Area or the 77th Street Maintenance District due and payable in previous years. Buyer shall pay all real estate taxes, installments of special assessments, and charges related to the Special Service District known as the Interstate/Lyndale/Nicollet Maintenance Area or the 77th Street Maintenance District and due and payable after the year of closing. Seller also agrees to pay all assessments related to service charges furnished to the Property prior to the Closing Date (e.g., delinquent water or sewer bills), including those charges levied,pending,or certified to taxes payable in the year of closing. 7. Closing Date. The Closing Date will be on or before . Delivery of all purchase documents and the closing shall be made at the offices of the Seller, 6700 Portland Avenue South, Richfield, Minnesota 55423, or at such other location as is mutually agreed upon by the parties. All deliveries and notices to Seller shall be made to the above address and marked to the attention of John Stark, Community Development Director. 8. Property. (a) Condition of Property, removals. Seller has made no representations or warranties concerning the condition of the Property or of any improvements located thereon. Seller shall have no obligation to remove any items from the Property prior to the Closing Date; and Seller abandons any right title or interest in any items remaining on the Property following the Closing Date. (b) No encumbrances. Seller agrees not to place any liens or encumbrances on the Property after the date of this Purchase Agreement., 9. Well Disclosure. Seller has provided Buyer with a separate well disclosure statement and will provide a well disclosure certificate at closing. 10. Seller and Signatory Warranties. (a) Sewer and water. Seller does not warrant whether the Property is connected to the City sewer and water systems. (b) Mechanics' Liens. Seller warrants that, prior to the Closing Date, except costs for work furnished Buyer in accordance with Paragraph 13, Seller shall pay in full all amounts due for labor, materials, machinery, fixtures or tools furnished within the 120 days immediately preceding 4 401090v5 JAE RC125-323 • the closing in connection with construction, alteration or repair of any structure upon or improvement to the Property. (c) Notices. Seller warrants that it has not received any notice from any governmental authority as to violation of any law, ordinance or regulation in connection with the Property. (d) Authority. Seller warrants that it is the owner of the Property, it has full authority to enter into this Purchase Agreement for the sale of the Property, and that there are no other parties who hold any unrecorded interest in the Property. 11. Broker Commission. Each party represents to the other that it has not utilized the services of any real estate broker or agent in connection with this Purchase Agreement or the transaction contemplated by this Purchase Agreement. Each party agrees to indemnify, defend, and hold harmless the other party against and in respect of any such obligation and liability based in any way upon agreements, arrangements, or understandings made or claimed to have been made by the party with any third person. 12. Closing Costs/Recording Fees/Deed Tax. The Buyer will pay: (a)the closing fees charged by the title insurance or other closing agent, if any, utilized to close the transaction contemplated by this Agreement; (b) the premium for title insurance policy, if any, obtained by the Buyer; and(c) any transfer taxes and recording fees required to enable the Buyer to record its deed from Seller under this Agreement. Seller will pay all other fees normally paid by sellers, including fees and charges related to the filing of any instrument required to make title marketable. Each party shall pay its own attorney fees. 13. Risk of Loss. If the Property is destroyed or substantially damaged before the Closing Date,this Purchase Agreement shall become null and void, at the Buyer's option. At the request of the Seller, Buyer agrees to sign a cancellation of Purchase Agreement. 14. Easement. The Property is subject to a Cross Access Easement Agreement, dated June 22, 1998 (the "Easement Agreement"), between the Seller and Candlewood Minneapolis, MN LLC that will continue to be in effect following the sale of the Property. The Easement Agreement grants the owner of the property directly south of the Property an access easement over the Property. Buyer has been provided and has reviewed a copy of the Easement Agreement. If Buyer wishes to renegotiate the Easement Agreement, it is solely the responsibility of Buyer to do so. As a condition of closing, Buyer must assume all of Seller's rights and responsibilities under the Easement Agreement. 15. Comprehensive Plan Amendment Consent. Seller hereby authorizes Buyer, at Buyer's sole cost and expense, to make application to the City for changes to the comprehensive plan of the City of Richfield or other land use changes that must be completed in order for Buyer to utilize the Property as contemplated. It is understood that any such changes will be effective only if the Property is sold to Buyer. 5 401090v5 JAE RC125-323 5- Co 16. Notice.Any notice,demand,request or other communication which may or shall be given or served by the parties, shall be deemed to have been given or served on the date the same is personally served upon one of the following indicated recipients for notices or is deposited in the United States Mail, registered or certified, return receipt requested, postage prepaid and addressed as follows: (a) in the case of the Buyer, is addressed to or delivered personally to the Buyer at 3209 Galleria, Unit 1804, Minneapolis, MN 55435, Attn: Richard LaMettry; with a copy to Joel Seitz, 5001 Chowen Avenue South, Minneapolis, MN 55410. (b) in the case of the Seller, is addressed to or delivered personally to the Seller at 6700 Portland Ave. So., Richfield, MN 55423, Attn: Community Development Director; with a copy to Kennedy & Graven, Chartered, 470 U.S. Bank Plaza, 200 South Sixth Street, Minneapolis,MN 55402,Attn: Julie A. Eddington. 17. Map. Attached to this Agreement as Exhibit C is a map (the "Map") which locates the various parcels which are legally described in this Agreement. The Map is for convenience purposes only,and the legal descriptions contained in the other exhibits control. 18. Entire Agreement. This Purchase Agreement, the attached exhibit, and other amendments signed by the parties, shall constitute the entire Agreement between Seller and Buyer and supersedes any other written or oral agreements between the parties relating to the Property. This Purchase Agreement can be modified only in a writing properly signed on behalf of Seller and Buyer. 19. Survival. Notwithstanding any other provisions of law or court decision to the contrary,the provisions of this Purchase Agreement shall survive closing. IN WITNESS WHEREOF,the undersigned have executed this Agreement on the date and year above. HOUSING AND REDEVELOPMENT LAMETTRY'S COLLISION, INC. AUTHORITY IN AND FOR THE CITY OF RICHFIELD By: By: Its Chair Its: And by: Its Executive Director 6 401090v5 JAE RC125-323 5-) EXHIBIT A LEGAL DESCRIPTION OF PROPERTY Lot 1, Block 1, Candlewood Hotel Addition A-1 401090v5 JAE RC125-323 _ ..,F -A. - je - _ , ,.6 , __ _Z k„... . ., o•- --- • -' . I. P k i i I:to - .a. 11 r ".•••••°"".' '• ''''•••"''''''' — - . ____-— — 7 . _ _ ' .-4: " ---'--!'—' -.;* '' --. ''''''..'. 7-,--- ,:- - :tC it/ 71•11•19111 - ... ' t5 % PS / -NI Orr - ,r ...-4 el -, Or I Y' ! Ili3 -iiie 6 • 1 0 6'. 9, -i- a ) . • b i E E --„-• . 2 FA 1 ....,..- / . . • , ,,, i .. : . . , , iL 4 14 .. - ----- 46-z•-„ -. 0 . 4; L i . r - lirE (1. b ilii:41 el .. 41 A I : 'IL Low of ,It V ...., , • - 0 0 ' ., -'' i r-' ' L (,) a.0 t .= I r. i CI. 4 5 5 r L 6 i t -" .. ., : ve 'cLultig-ii.ailejoicitig6fElbt.141_10:AtevrEAlitis.:::1 1__ L: .....- i al Iff mm„, icrWB kit: to-OLLfilikitilt_riT atilt. 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'illtr __-...-1---- a) .- I' ' . .k . , / ....I Atv.,.,77........7114,, • : r.7.4 ,... ,.,..,.. AGENDA ITEM#: 6 REPORT#: 32 STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 16, 2012 REPORT PREPARED BY: KAREN BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR NAME,TITLE REPORT PRESENTER: KAREN BARTON, COMMUNITY DEVELOPMENT ASSISTANT DIRECTOR NAME,TITLE DEPARTMENT DIRECTOR REVIEW: PI REVIEWED BY EXECUTIVE DIRECTOR: n/ fig" ITEM FOR HRA CONSIDERATION: Consideration of a Consent to Second Mortgage Request to allow Local Initiatives Support Cor oration (LISC) to file a mortgage against 6330 L ndale Avenue. I. RECOMMENDED ACTION: By Motion: Approval of a Consent to Second Mortgage Request allowing Local Initiatives Support Corporation (LISC) to file a mortgage against 6330 Lyndale Avenue. II. BACKGROUND The Richfield Housing and Redevelopment Authority (HRA) provided a Business Subsidy deferred loan in the amount of$315,000 to Lyndale Gardens LLC (Developer) in November 2011 for substantial rehabilitation activities related to the Lyndale Gardens redevelopment. To secure the loan, the HRA placed a lien against the property located at 6330 Lyndale Avenue, which is part of the larger Lyndale Gardens redevelopment project, and subsequently recorded a mortgage against the property which prohibits any other encumbrances. In November of last year, the Developer entered into a loan agreement with LISC for the acquisition of the property located at 6400 Lyndale Avenue (the former Lyndale Garden Center building). The agreement anticipated Lyndale Gardens LLC's acquisition of the 6330 building and the first priority lien on that property by 07162012-Lyndale Gardens Consent to Second Mortgage Request the HRA. The agreement also anticipated that LISC and the HRA would consent to a second mortgage allowing LISC to place a lien against the 6330 Lyndale Avenue property. This action was necessary because the loan funds that LISC provided, which are secured by the 6400 Lyndale Avenue property, were for acquisition and pre- development funding of the entire Lyndale Gardens redevelopment project, which includes the property located at 6330 Lyndale Avenue. In order to complete a development similar to the Concept Plan referred to in both the City's and LISC's loan documents, both properties are to be redeveloped. LISC allowed the City to hold a second position lien on the 6400 Lyndale Avenue property until the time that the 6330 Lyndale Avenue property was acquired with the understanding that they, in turn, would be allowed a second position lien on the 6330 Lyndale Avenue property behind the HRA. The HRA is not being asked to subordinate its first- priority mortgage. Staff recommends the HRA consent to LISC placing a second mortgage on the 6330 Lyndale Avenue property at this time. III. BASIS OF RECOMMENDATION A. POLICY • It is the HRA's policy to secure public funding as feasible and appropriate. • 2008 Comprehensive Plan Goal: o Develop the Lakes at Lyndale area as a City Center. o Support commercial land uses that are diverse and responsive to their context B. CRITICAL TIMING ISSUES • Per the Agreement between LISC and Lyndale Gardens LLC, the LISC lien must be placed against the 6330 Lyndale Avenue property. C. FINANCIAL • The HRA will maintain its first-priority lien against the property, securing the $315,000 mortgage. D. LEGAL • HRA legal staff has reviewed the consent document. IV. ALTERNATIVE RECOMMENDATION(S) • Do not approve the consent to second mortgage request. V. ATTACHMENTS • Consent to second mortgage. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • Representatives of The Cornerstone Group/Lyndale Gardens LLC. (r I DRAFT July 11,2012 LISC P.A.#45311-0001 INTERCREDITOR AND CONSENT AGREEMENT THIS INTERCREDITOR AND CONSENT AGREEMENT(this"Agreement") made as of the day of , 2012,by and between LOCAL INITIATIVES SUPPORT CORPORATION, a New York not-for-profit corporation with its principal offices at 501 Seventh Avenue, 7th Floor,New York,New York 10018 ("LISC"), and THE HOUSING AND REDEVELOPMENT AU_J _ TY IN AND FOR THE CITY OF RICHFIELD, a Minnesota public body corpo ... =and politic under the laws of the State of Minnesota,having its principal office .-=L_ .'ortland Avenue, Richfield,Minnesota 55423 ("Authority"), and consent=i d a to by LYNDALE GARDENS LLC, a Minnesota limited liability comp ry_ its p al office at 5* (`B er"). .a Back-----o A. Pursuant to a funding agreement, a bus r= ', subsidy agreement, and a contract for private development be uthority and-ff.ower, each dated November 16,2011 (collectively,the"Authority -5 - _-_Its"),Autho=a5 made available to Borrower financing in the amount of$611 01-—=1I . e"Autho " Financing"),the proceeds of which will be used by Borro 7-, to4G a LI_ f the costs of acquisition of the real property locate•uE5•.commonly as 64TLyndale Avenue South, Richfield,Minneso ._...re e Garden .•perty"),'Borrower intends to redevelop the Lyndale Gard- .I erty to mplete a ml,i-tenant community retail and commercial space acce Z, -_a to s ents of Ri ' veld, Minnesota(the"Project"). B -=-=- =.. cing is cured by a first priority mortgage on the real prope °ocated at • _-3 _�_ o or as 6330 Lyndale Avenue South, Richfield, 1 .--a-. as more ful . cribe F-_= xhibit A(together with all present and future improve'= and fixtures ereo.-the "6330 Lyndale Property"), granted by Borrower to the Auth-Vra. dated Ma 2,2012,in the original principal amount of$315,000.00 (to secure the amoo VVj.f the • ri ority Financing that is a loan), and recorded in the official public records o e`-County, Minnesota as Document Number T4965139 (the "Authority Mortgag C. Pursuant to a loan agreement between LISC and Borrower, dated November 21,2011, (the"LISC Loan Agreement"), LISC has made available to Borrower a$2,300,000.00 loan(the"LISC Loan"), as evidenced by a promissory note dated the date of the LISC Loan Agreement and executed by Borrower in favor of LISC (the"LISC Note"),the proceeds of which will be used by Borrower to pay a portion of the costs of the Project. D. The LISC Loan and the LISC Note are secured by, among other things, a first priority mortgage, security agreement, assignment of leases and rents, and fixture 1 filing on the Lyndale Garden Property granted by Borrower to LISC, dated the date of the LISC Note, in the original principal amount of$2,300,000.00, and recorded in the official public records of Hennepin County, Minnesota as Document Number T4903926 (the "LISC Mortgage"). E. As a condition to LISC's agreement to extend the LISC Loan to Borrower, LISC required that the LISC Mortgage be amended to include a second priority lien on the 6330 Lyndale Property(the"LISC Mortgage Modification") subject to the first priority lien of the Authority Mortgage on the 6330 Lyndale Property. F. In furtherance of the Project,Authority is will ent to the LISC Mortgage Modification spreading the lien of the LISC Mort.r to the 6330 Lyndale Property, on the terms and conditions set forth below. Terms - In consideration of the foregoing and t w= 15 venant= d agreemen d rth below, and for other good and valuable considers&the .t and suffic cy of which are acknowledged,the parties, intending to b Jr4=?y bound, agree: 1. LISC agrees that its lie«=gym. a 6330 Lyn• � .'__.operty, as evidenced by the LISC Mortgage Modification, is ante - s ubordinate4, -e lien of the Authority Mortgage on the 6330 Lyndale Property:° 2. LISC a? = e subord'Fez ion in p aph 1, above, shall apply to all advances,whether atory ,i .luntary, s =_ ed by the Authority Mortgage,not to exceed the princi t ° t at M. time outs .T31.1.. of$315,000.00 plus all interest, fees, charges, costs and exp .el- ' without =3 'tation taxes, insurance premiums,and reasonable fees .►E1 i.siSbecome due under the Authority Mortgage. Autho- nsen W; i execution and delivery of the LISC Mortgage by BorrowF=- favor-" ISC, and acknowledges that such execution and delivery . -!of constitu= defait under the Authority Mortgage. 4. g in� s Agreement is intended or shall be construed to affect or impair the first pri of the LISC Mortgage encumbering the Lyndale Garden Property. 5. Authority agrees that it shall give written notice to LISC of any default by Mortgagor under the Authority Mortgage and that it shall permit LISC the right and opportunity to cure and correct any default within a period of thirty(30) days after written notice of such default to LISC, with such additional periods of time as may be required to cure or correct a non-monetary default if such default cannot be cured or corrected within such period of thirty(30)days, so long as LISC commences with such period of thirty(30)days to cure or correct such default and thereafter endeavors diligently and continuously to cure or correct such default and such cure can be 2 accomplished within a period of sixty(60) days after written notice of such default; provided,however,that LISC shall have no obligation to cure or correct any default and that LISC's cure or correction of a default in one instance shall not create any obligation on the part of LISC to cure or correct any default in any other instance. 6. LISC agrees that it shall give written notice to Authority of any default by Mortgagor under the LISC Mortgage(as amended by the LISC Mortgage Modification) and that it shall permit Authority'the right and opportunity to cure and correct any default within a period of thirty(30)days after written notice of such default to Authority,with such additional periods of time as may be required to cure or corr-_ t a non-monetary default if such default cannot be cured or corrected within suc e -._of thirty(30) days, so long as Authority commences with such period of thirty _!days to cure or correct such default and thereafter endeavors diligently and cont. uM_i -■ cure or correct such default and such cure can be accomplished within a pe in:.of sixE_i days after written notice of such default;provided,however,that Au !__ _s .11 have ligation to cure or correct any default and that Authority's cure o_u=orrection of a defau one instance shall not create any obligation on the part of_i _ .ty to a or correct .... ult in any other instance. 7. Any notices under thi greement shal -'_2 writing(or by fax, e-mail, or similar electronic transmission conf _ writing) and 7= be deemed to have been duly given or made(i)when delivered =aE<<__ (ii)if give-Mel--- ail,three(3)days after deposited in the mails by certified .'1,re G _ :ipt resT ested,sufficient postage prepaid, or(iii)if given by fax, e-mail, or :_ ..,, eleransmission,when sent and receipt has been col 6jrg=e=_._essed as s below, o such other address as the addressee may have 6 notice dul-I.iven to the other addressees: . To Authority: _ _= '4^ _Hour - d Redevelopment Authority 6700 ' ijdA— �:. uth Richfield-1,;_ _ 554 1r Attn: Exec> e Di-ector *_i.one: (61 M 61-9700 Fax: (612) 861-9749 '1: To LISC: Local Initiatives Support Corporation 501 Seventh Avenue, 7th Floor New York,New York 10018 Attn: Patrick Maher,Vice President and Deputy General Counsel Phone: (212)455-9861 Fax: (212) 682-8608 E-Mail: pmaher @lisc.org 3 Le- Li To Borrower: Lyndale Gardens LLC Attn: Colleen Carey,President (612) FAX: E-Mail: ccarey@tcgmn.com With a copy to: Winthrop and Weinstine 225 South Sixth Street, Suite 3500 �= Minneapolis, Minnesota 55402 Attn: Tammera Diehm, Esq. (612) 766-6833 __•12) � 1632 E-Mail: tdiehm @winthrop.com — - 8. The parties acknowledge == .1r$ignatures" follQw g panes.] , ,- • • ■ • U- LOCAL INITIATIVES SUPPORT CORPORATION By: Name: Title: STATE OF NEW YORK SS: COUNTY OF NEW YORK — -- of _ before-= �a Notary Public On this_day —_ tart' in and for said County and State,personally app d �=_ and acknowledged himself/herself to be =_ —= of Local Initiatives Support Corporation and h . .. auk--J.ed to do so such officer executed the foregoing instrument for the purposes i I .y contained on be of the corporation. WITNESS my hand and notarial .7-- ay and ye said. Notary Public __,_________i__s__________.__,,_.,_.=.__=.7;_____,._ ,.._.,,,,J______:_,_--------------7--1----1-11= v. __—_-----i % ,,1 _____ -----::_ --- 1 b.7--_--2.---------- ..---- -r 6 HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD By: Name: Title: = STATE OF MINNESOTA) _= _ ) ss. _.== COUNTY OF HENNEPIN) — _ _- Ver- The foregoing instrument was acknowledges =R=a me this_day of , 2012,by the _-=.._the Housing .F = t edevelopment Authority in and for the City of Richfield, MinneF1= _".uthority") -= lie body corporate and politic, on behalf of the Authority. — _ — - No . F b 1 i c _ illb, =---:; --------__,-T--- 7 le-q Consent The undersigned consents to and accepts the terms and provisions of this Intercreditor and Consent Agreement. LYNDALE GARDENS LLC By: N. . — Tit1 STATE OF MINNESOTA) ) ss. __= __ __ COUNTY OF HENNEPIN) The foregoing instrument was-- .,A wledged befo this day of the ° o -,---a_:e Gar s LLC, a Minnesota limited liability company, on behalf of su =1'!jp d" -=ompany. 41:1 ;- - 8 U -9 EXHIBIT A LEGAL DESCRIPTION „a„----;-‘_ ,.z._. ,.v.--...-1;ftt,".7—_______;_____ _ - 14.77::::,------,-.„7-- -'----- 9 AGENDA ITEM#: 7 REPORT#: 33 STAFF REPORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING JULY 16, 2012 REPORT PREPARED BY: JULIE URBAN,HOUSING SPECIALIST NAME,TITLE REPORT PRESENTER: KAREN BARTON,ASSISTANT COMMUNITY DEVELOPMENT DIRECTOR NAME,TITLE DEPARTMENT DIRECTOR REVIEW: Pier_ / SIGN�' RE REVIEWED BY EXECUTIVE DIRECTOR: / ITEM FOR HRA CONSIDERATION: Consideration of an amendment to the Subordination and Satisfaction Policy. I. RECOMMENDED ACTION: By Motion: Approve an amendment to the Subordination and Satisfaction Policy. II. BACKGROUND In June 2011 the Housing and Redevelopment Authority (HRA) directed staff to make changes to the Subordination and Satisfaction Policy to allow subordinations in cases where the Loan to Value (LTV) ratio exceeded 80 percent, but the amount of financing ahead of the HRA's lien did not increase. The effect of that change has served to reduce the number of appeals brought to the HRA. However, staff has determined that an additional change to the Policy would serve to further reduce the number of appeals brought to the HRA. The change requested by staff would be to: • Allow subordinations in cases where the Loan to Value (LTV) ratio exceeds 80 percent, but the amount of financing superior to the HRA's lien increases 07162012 Subordination Policy Amendment.doc no more than the cost of settlement charges (i.e., closing costs and escrow payments). In April and May of 2012 the HRA considered and granted two subordination appeals that met this requirement, and a third similar appeal is being considered by the HRA at the July 16 meeting. Three additional subordination requests submitted in the past year met this criterion; however, the homeowners either elected to put additional cash into the closing or withdraw their subordination request. The homeowners in the cases brought forward to the HRA on appeal were/are unable to afford the cash necessary to pay settlement charges. III. BASIS OF RECOMMENDATION A. POLICY • The HRA's Subordination and Satisfaction Policy was last revised in 2011 to allow staff to grant appeals in cases where the LTV exceeds 80 percent but the amount of financing ahead of the HRA's lien did not increase. B. CRITICAL TIMING ISSUES • Requiring an appeal to the HRA causes a delay for homeowners that can result in higher loan interest rates. C. FINANCIAL • The Executive Director would have the ability to grant an appeal to the standard subordination policy in cases where the HRA's financial position stays the same, or improves, or is worsened no more than the cost of settlement charges. • Approving subordinations and allowing homeowners to refinance can improve their ability to make their mortgage payments, thereby helping to prevent foreclosure. • Housing values have declined over the past few years, leaving homeowners with reduced equity. These homeowners, often underwater, have been able to qualify for refinancing through the federal HARP program. Homeowners with HRA liens with insufficient cash to pay for settlement charges are unable to take advantage of this program. D. LEGAL • The HRA Attorney reviewed the proposed change. IV. ALTERNATIVE RECOMMENDATION(S) • Approve the proposed change to the Subordination and Satisfaction policy with revisions. • Do not approve the proposed change to the Subordination and Satisfaction policy. V. ATTACHMENTS • Subordination and Satisfaction policy showing the proposed change. VI. PRINCIPAL PARTIES EXPECTED AT MEETING • NA 9- I RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY SUBORDINATION&SATISFACTION POLICY EFFECTIVE J-U-N€JULY 20142 Subordinations Richfield Housing and Redevelopment Authority(HRA) loan recipients requesting subordination of the interest of the HRA in real property must submit a Subordination Request Form, the required supporting documentation, and a processing fee. Forms are available on the City of Richfield website(http://www. cityofrichfield.org/) or by calling the Community Development Department at 612-861-9760. Requests will not be considered until all documents and the processing fee have been received. Required Documents The following information must be submitted with the Subordination Request Form: 1. A typed letter dated and signed by the mortgagor, stating the reason for the requested subordination and the use of any equity being removed as part of the loan transaction. 2. A copy of the current appraisal (dated within six months of application) or other evidence of market value of the property that is acceptable to the HRA. 3. A copy of current title work(must indicate all debt against the property). 4. Explanation of remaining debts or liens with supporting documentation (i.e. most recent mortgage bill). 5. Estimated closing costs/settlement statement, where applicable. 6. A copy of the mortgagor's loan application. 7. Additional documentation may be required. Evaluation Criteria The Richfield HRA will subordinate its mortgage interest if all of the following conditions are met, to the extent that they are applicable: 1. Closing costs are reasonable. Generally this shall mean that the sum of all discount points, origination fees, and lender ancillary fees generally shall not exceed 3% of the new first mortgage amount. 2. If the HRA believes that the payment terms of the refinance are within the financial means of the borrower. 3. The total debt secured by the property, including the HRA lien and all superior mortgages, does not exceed 80% of the documented market value of the property. 4. Any equity being removed beyond the cost of the loan transaction will be used to improve the property. A typed letter, dated and signed by the applicant, must be submitted stating the use of any equity being removed. 5. The overall value of superior debt must not be increased by more than 50%. Exceptions may be granted by the HRA in cases where superior debts are found to be unusually low with sufficient equity protection. rl- 6. If no more than one subordination request has been approved by the HRA in the past five years. 7. Property taxes, if not escrowed by the superior mortgage holder, must be current. The HRA will not subordinate to reverse mortgages. In most cases, interest-only loans or loans with interest-only options, revolving lines of credits or debt consolidation will not be allowed unless the HRA determines that an acceptable reason warrants this type of loan. The HRA may approve other subordination requests not meeting the conditions above on a case-by-case basis that are clearly in the best interests of the HRA, where the security of the HRA loan remains acceptable, and denial of the request will cause or contribute to a documented hardship on the part of the borrower. As a condition of approval, the HRA may require the Borrower to receive financial counseling. While many courses are available at no charge, the Borrower is responsible for any costs associated with the counseling. The course must be approved by the HRA. Fees The fee for a subordination request is established by the HRA. If the subordination request is denied, the fee will be returned with a letter explaining the reason(s)for denial. An additional fee is required for an appeal to the HRA and is non-refundable. Processing Subordination requests will be processed by HRA staff,who will submit the request with a recommendation for action, to the Executive Director. The Executive Director may request review and final decision by the HRA. Requests for subordination should be submitted 30 days prior to the date the agreement to subordinate is needed. Exceptions may be made on a case-by-case basis. Appeal Process In cases where a subordination request does not meet the Policy, the Executive Director may grant an administrative appeal under the following circumstances: • Loan-to-value(LTV) ratio is greater than 80%, but no greater than 85%; or • Equity being removed for anything other than property improvements does not exceed $5000; or • The amount of financing oh ad of superior to the HRA lien does not increase more than the cost of settlement charges related to the refinancing. If an application is denied, the applicant may request an appeal in writing. Appeals will be submitted by staff to the HRA at the next regularly scheduled meeting, provided the request is made at least 10 days prior to that meeting. The HRA meets on the third Monday of each month. Satisfactions When a loan made by the HRA is paid in full, a document satisfying the lien will be prepared by the HRA and delivered to the borrower for recording. The borrower is responsible for the cost of recording the satisfaction.