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05-21-07 Special CITY OF RICHFIELD, MINNESOTA MONDA V, MA V 21, 2007 REGULAR HOUSING AND REDEVELOPMENT AUTHORITY MEETING RICHFIELD CITY HAll COUNCil CHAMBERS 6700 PORTLAND AVENUE 7:00 P.M. AGENDA Call to order Roll call 1. Approval of minutes of Regular HRA Meeting of April 16, 2007 and Special HRA Meeting of May 8, 2007 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 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 resolution authorizing modifications to Richfield Rehabilitation Deferred Loan Program guidelines S.R. No. 17 B. Consideration of approval of resolution authorizing HRA not to waive monetary limits on statutory municipality tort liability S.R. No. 18 Notes: 4. Presentation and discussion of future needs of Partnership Academy, Richfield Staff Report No. 19 Notes: 5. Consideration of contract with Greater Metropolitan Housing Corporation to deliver housing programs and services. Staff Report No. 20 Notes: 6. Consideration of authorizing allocation of Apartment Remodeling Incentive Funds to @ Home Apartments for rehabilitation of Gateway Pointe Apartments, 75th Street and Lyndale Avenue . Staff Report No. 21 Notes: 7. Consideration of modifying guidelines for mortgage foreclosure response program Staff Report No. 22 Notes: 8. Executive Director report 9. 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. AGENDA ITEM # 3A REpORT # 17 .... STAFF REpORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING MAY 21,2007 REpORT PREPARED By: V ANESSA HAIGHT, HOUSING SPECIALIST NAME, TITLE REpORT PRESENTER: VANESSA HAIGHT, HOUSING SPECIALIST DEPARTMENT DIRECTOR REVIEW: NAME, TITLE REVIEWED By EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Consideration of a resolution regarding modifications to the Richfield Rehabilitation Deferred Loan Prooram Guidelines. . I. RECOMMENDED ACTION: By Motion: Approve the attached resolution authorizing modifications to the Richfield Rehabilitation Deferred Loan Program Guidelines. I II. BACKGROUND I The Housing and Redevelopment Authority (HRA) instituted the Richfield Rehabilitation Deferred Loan Program (Deferred Loan Program) in 1978 with annual allocations from the City's Community Development Block Grant (CDBG) funds. This year's allocation ($173,541) will serve approximately six to eight households through the Deferred Loan Program. . Due to HRA staff reductions, Hennepin County now administers the Deferred Loan Program. Hennepin County has been very successful in transitioning the clients and closing loans. In the past, the HRA has modified the Hennepin County program procedural guidelines to reflect community priorities (Le. using a 3D-year lien rather than a 15- 052107 Deferred Loan Changes year lien). In 2006 the guidelines were modified to continue limiting the program to those households earning less than 50% of Area Median Income (AMI) ($39,250 for a family of four). The CDBG funds can also be used to offer low-interest (usually 3% interest) rehabilitation loans to households earning 51 to 80% of AMI. The majority of Hennepin County communities offer CDBG loans to both income levels. By raising the threshold to 80% ($59,600 for a family of four) AMI, the County can assist households with young children allowing CDBG funds to be used in concert with their Housing and Urban Development (HUD) lead hazard reduction funds. I III. BASIS OF RECOMMENDATION I I A. POLICY I . The HRA supports rehabilitation of housing and provides financial assistance to do so. Richfield homeowners earning less than 80% AMI but more than 51 % AMI do not currently have a low-interest loan program available to them. Expanding the loan program to include these households will fill a gap in HRA housing programs. . The HRA's Deferred Loan Program is administered by Hennepin County according to procedural guidelines, in accordance with requirements of HUD. However, local discretion is allowed in some areas, including raising the eligibility to 80% AMI. I B. CRITICAL ISSUES I . The HRA needs to respond to the demand for low-interest rehabilitation loans by households earning between 51 and 80% AMI that cannot afford standard loans requiring a monthly payment. . If the HRA desires, preference can be given to households earning less than 50% AMI. IC. FmANC~L I . The Deferred Loan Program remains the only reliable, affordable financing option for fixed-income seniors and low-income families and individuals. Deferring loan proceeds to a future time, usually upon sale of home, rather than requiring monthly payments is important for household stability. I D. LEGAL I . The HRA must authorize changes to the Deferred Loan Program. I IV. ALTERNATNE RECOMMENDATION(S) I . Delay adoption of the revised procedural guidelines. . Deny changes to the guidelines. I V. ATTACHMENTS . Resolution . Summary of Changes to Deferred Loan Guidelines (Exhibit A) I VI. PRINCIPAL PARTIES EXPECTED AT MEETmG . N/A 3A-{ HRA RESOLUTION NO. RESOLUTION AUTHORIZING APPROVAL OF MODIFICATIONS TO THE RICHFIELD HOME REHABILITATION DEFERRED LOAN PROGRAM WHEREAS, the Richfield Housing and Redevelopment Authority (the "HRA") provides a Rehabilitation Deferred Loan Program which utilizes Community Development Block Grant (CDBG) funds to assist lower and moderate income homeowners with rehabilitating.their homes; and WHEREAS, the program's Procedural Guidelines were approved by the HRA in 1999 and are modified periodically as program requirement and needs dictate; and WHEREAS, Richfield staff has identified modifications to update the program's Procedural Guidelines, as described in Exhibit A; and WHEREAS, the HRA has reviewed the modifications. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota that the Richfield Rehabilitation Deferred Loan Program Procedural Guidelines will be modified according to the changes made by Hennepin County. . Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 21st day of May, 2007. Suzanne M. Sandahl, Chair ATTEST: Donna Drummond, Secretary 3 A- d-- Exhibit A SUMMARY OF CHANGES TO DEFERRED LOAN GUIDELINES Current: . Borrowers must have a household gross annual income at or below 50% of the Area Median Income (AMI) for the household size. . Loan is deferred for 30 years and is interest free. Proposed: . Borrowers must have a household gross annual income at or below 80% of the AMI for the household size. . Borrowers with a household gross annual income at or below 50% AMI are eligible for an interest free, 30 year deferred loan. . Borrowers with a household gross annual income between 51 % and 80% AMI are eligible for a 3% interest, 30 year deferred loan. . Preference is given to households earning less than 50% AMI. AGENDA ITEM # 3B REpORT # 18 ....... STAFF REpORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING MAY 21, 2007 REpORT PREPARED By: STEVEN L. DEVICH, EXECUTIVE DIRECTOR NAME, TInE REpORT PRESENTER: STEVEN L. DEVICH, EXECUTIVE DI OR REVIEWED BY EXECUTIVE DIRECTOR: ~ ITEM FOR HRA CONSIDERATION: Consideration of a resolution authorizing the HRA not to waive the monetary limits on statutory municipality tort liability L RECOMMENDED ACTION: I By Motion: Adopt a resolution authorizing the HRA not to Waive the monetary limits on municipal tort liability established by Minnesota Statutes 466.04. I II. BACKGROUND I The HRA purchases its insurance from the League of Minnesota Cities Insurance Trust (LMCIT). A requirement of that insurance coverage is that each participating municipality must annually either affirm or waive its statutory limits of liability. This action must be taken on or before July 1 of each year. The current statutory limits of liability for Minnesota cities are $300,000 for an individual claimant and $1,000,000 per occurrence. Cities can waive those limits by allowing an individual claimant to recover more than $300,000, up to the $1,000,000 occurrence limit or more if limits are waived and excess liability insurance is purchased. They may also waive the per occurrence limit and purchase excess liability insurance. Historically, the Richfield HRA has not waived its limits of liability. This is true of the City of Richfield also. The majority of cities in Minnesota have not waived their limits in the past. OS/21 Tort Liability HRA I III. BASIS OF RECOMMENDATION I I A. POLICY I, . The State Statute establishing liability limits for cities at the current $1,000,000 level was established fairly recently and appears to be a reasonable limit. . Historically, just over one-half of the municipalities in Minnesota have not waived the monetary limits on municipality tort liability as was established by statutes 466.04. , . The HRA could waive its statuary limits in future years if the Commissioners should decide to do so. . The City of Richfield has historically not waived its limits of liability. I B. CRITICAL ISSUES I . The HRA's insurance policy with the League of Minnesota Cities Insurance Trust renews on July 1,2007. This action must be completed before that time. . The HRA does not have to make a decision on purchasing excess liability coverage at this time. Coverage such as excess liability may be added at any time. I C. FINANCIAL I . There is a slight premium savings for political entities that affirm the statutory monetary limits. For the Richfield HRA the savings would be less than $1,000 for the coverage year. . The HRA has historically not purchased excess liability coverage because of the relatively high cost of such coverage. The cost for $1,000,000 of excess coverage would be between $5,500 and $6,500 per year. I D. LEGAL I . The tort liability limits established by Minnesota statutes have protected cities historically and no Minnesota court has ever established a monetary award in excess of the statutory limits against a municipality. . Each municipal entity must annually decide whether the City would voluntarily waive the statute for both the single claims each occurrence limits. I IV. ALTERNATIVE RECOMMENDATION(S) I . If the HRA feels that any single claimant should receive more than the $300,000 limit, the HRA could elect to waive the statutory monetary limits. . If the HRA feels that the $1,000,000 per occurrence limit is not adequate, the HRA could purchase excess liability coverage and subsequently waive the limits of liability up to the amount of excess coverage purchased by the HRA. I V. ATTACHMENTS . Resolution I VI. PRINCIPAL PARTIES EXPECTED AT MEETING . None 5B-1 HRA RESOLUTION NO. RESOLUTION AFFIRMING MUNICIPAL TORT LIABILITY LIMITS ESTABLISHED BY MINNESOTA STATUTES 466.04 WHEREAS, Minnesata Statute 466;04 provides far Municipal tart liability limits far Minnesata cities; and WHEREAS, the League af Minnesata Cities Insurance Trust has asked that each city review the tart liability limits and determine if the respective city wauld chaase to. waive it's limits; and WHEREAS, such decisian to. affirm ar waive the tart liability limits must be filed with the League af Minnesata Cities Insurance Trust at the insurance renewal date. NOW, THEREFORE, BE IT RESOLVED that the Executive Directar is directed to. repart to. the League of Minnesata Cities Insurance Trust that the Richfield HRA daes nat waive the manetary limits an the municipal tart liability established by Minnesata statutes 466.04. Appraved by the Hausing and Redevelapment Autharity in and far the City af Richfield, Minnesata this 21st day af May 2007. Suzanne Sandahl, Chair ATTEST: Danna Drummand, Secretary AGENDA ITEM # 4 REpORT # 19 ..... STAFF REpORT RICHFIELD I HOUSING AND REDEVELOPMENT AUTHORITY MEETING MAY 21,2007 REpORT PREPARED By: BRUCE PALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE REpORT PRESENTER: BRUCE P ALMBORG, COMMUNITY DEVELOPMENT DIRECTOR NAME, TITLE DEPARTMENT DIRECTOR REVIEW: REVIEWED BY EXECUTIVE DIRECTOR: ITEM FOR HRA CONSIDERATION: Presentation and discussion of Partnership Academy, Richfield. I. RECOMMENDED ACTION: By Motion: Listen to a presentation about Partnership Academy and their future needs and respond appropriately. I II. BACKGROUND I Partnership Academy (PA) is a charter school currently located at Assumption Parish School. Representatives of PA would like to introduce themselves to the HRA and tell their story of the past and their hopes for the future. PA has an enrollment in grades K - 6 of over 200 students, most of whom reside in Richfield. They have recently completed a long-range plan and project a need for a larger facility in the near future. Assumption is unable to meet their projected growth needs. PA is seeking a site in Richfield and has been unable to identify one, which would meet their needs. Their concept, in addition to a school, includes an affordable housing element as well as a family resource center. They are particularly interested in the current City garage site, which will be vacated during the summer of 2008. Discussions about the future of the site are underway and a Request for Qualifications (RFQ) will be circulated in the fall of 2007. 51507 Partnership Academy Their future concept is unique to this area. However, they recently traveled to California to visit an example of the concept they have in mind. The attached brochure provides additional background information on the school and their partnership with Project For Pride In Living (PPL) based in Minneapolis. Partnership Academy's website address is www.paschool.org and Project For Pride In Living's website address is www.ppl-inc.org. The challenge of finding a site in Richfield is formidable, as is the financing. The school portion of the facility would be exempt from real estate taxes, which adds another complication. However, the representatives of PA and PPL understand that and while their future is exciting, it will take perseverance to proceed. I III. BASIS OF RECOMMENDATION I I A. POLICY I . The HRA seeks to be informed about the needs of community organiiations with facilities that serve the community. I B. CRITICAL ISSUES I . Partnership Academy desires to grow and help better meet the needs of their community and the larger Richfield community. They would like to explore other community needs, which they may be able to meet, in such a facility. I C. FINANCIAL I . Partnership Academy won an award from the Minnesota Department of Education in February 2007 for financial management. I D. LEGAL I . Partnership Academy is legally organized under Minnesota State law. I IV. ALTERNATIVE RECOMMENDATION(S) . Delay the presentation to another date. I V. ATTACHMENTS . Information brochure. I VI. PRINCIPAL PARTIES EXPECTED AT MEETING . Partnership Academy . Lisa LaDue, Executive Director . Charles Bodden, Director of Operations and Development . Milpha Blamo, Director of Finance . Project For Pride In Living . Steve Cramer, Executive Director . 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[; (1) 'O.i: ~'1:l ...l:l:::: ~ .~ 1:l ~ = ~ of! .9 00 ~ 00 t) ~ 05:g e;9 ...... 0 tl ~ ~.... = III 00 ...... 'g ~ = CIl .2 (1) r-. tI.) .~ (1) (1) r-. t) 00 0 ~ CIl CIl- ~ ~ CIl g 0 cJ ..... o .... r-. (1) 'E o = ...... """' 00 -= (1) S 00 (1) 00 < C;; S r-. o ~ '0 = CIl C;; S r-. ..9 = ...... '-' o . o L/-3 00 00 Q) = "g t) (1) = = o C) ..Q 's ~ '0 = CIl .E' = = S S o C) o 00 (1) ..... .... 'S = 1:: o P< P< o bO = ..... = r-. CIl (1) ...:l '0 (1) '0 = (1) ~ o . . . L-{-Y +-' C Q) E c. o Q) > Q) O. .....I 0- 0- ........... >. E Q) "'0 ccs U <( c. ..c CJ) ~ Q) C +-' ~ ccs 0- S Q) z <( "'0 Q) '+- ..c u a:i C AGENDA ITEM # 5 REpORT # 20 ~ STAFF REpORT RICHFIELlJ HOUSING AND REDEVELOPMENT AUTHORITY MEETING MAY 21,2007 REpORT PREPARED By: VANESSA HAIGHT, HOUSING SPECIALIST NAME, TITLE REpORT PRESENTER: VANESSA HAIGHT, HOUSING SPECIALIST DEPARTMENT DIRECTOR REVIEW: . NAME, TITLE REVIEWED By EXECUTWE DIRECTOR: ~ ITEM FOR HRA CONSIDERATION: Consideration to continue the collaborative effort between the Housing and Redevelopment Authority and Greater Metropolitan Housing Corporation to deliver housing programs and services. I. RECOMMENDED ACTION: By Motion: Authorize the contract with the Greater Metropolitan Housing Corporation to deliver housing programs and services. I II. BACKGROUND I The Greater Metropolitan Housing Corporation (GMHC) specializes in a variety of housing programs and services. GMHC's partnership with the Richfield Housing and Redevelopment Authority (HRA) began in 2004 and ensures a full offering of housing programs and services for Richfield residents. In 2006, GMHC provided 343 services to 221 Richfield residents through its Southside HousingResource Center. Services offered include: home buyer information, loan services (including Minnesota Housing Finance Agency loans), construction consultations, energy assistance, mortgage foreclosure prevention, home improvement information, and assistance with rental and emergency housing issues. 052107 GMHC Contract The HRA also partners with GMHC on the New Home Program, as demonstrated by the recently completed home on 14th Avenue. Additionally, GMHC developed the Senior Housing Regeneration Program where they buy single family homes from seniors that need to sell, rehabilitate the home, then sell the home to a first- time homebuyer. The first Richfield Senior Regeneration home will be sold in June. Staff would like to continue the Senior Regeneration Program in Richfield. Representatives of GMHC will be in attendance at the May HRA meeting to present an overview of the organization and its programs. I III. BASIS OF RECOMMENDATION I I A. POLICY I . A partnership between the HRA and GMHC ensures comprehensive rehabilitation resources available to Richfield residents. . New opportunities are available because of the partnership, particularly in the area of new and rehabilitated homes for modest income homeowners. I B. CRITICAL ISSUES I . Actions to support more remodeling activity and access to good advice and financial capital are needed. . With GMHC, Richfield homeowners receive the most comprehensive support and program offerings in the most cost-effective manner. . GMHC offers their package of programs and services in 16 Metro area communities. Richfield needs to offer similar services to remain competitive. I C. FINANCIAL I . The cost for services in 2007 is $7,000. . Resources are provided in the approved HRA budget in the Rehabilitation Program. I D. LEGAL I . The contract is similar in form and content to the initial contract reviewed by legal counsel. I IV. ALTERNATNE RECOMMENDATION(S) I . The HRA can choose to modify the scope of services, modify the amount, or not provide the services being proposed. I V. ATTACHMENTS . Agreement I VI. PRINCIPAL PARTIES EXPECTED AT MEETING . Carolyn Olson, GMHC President . Suzanne Snyder, GMHC Program Director 5-{ CONSULTANT SERVICES AGREEMENT THIS IS AN AGREEMENT entered into the day of , 2007, by and between the Richfield Housing and Redevelopment Authority hereinafter referred to as the HRA, and the Greater Metropolitan Housing Corporation (GMHC), a nonprofit corporation organized and existing under the laws of the State of Minnesota, hereinafter referred to as the Consultant. WITNESSETH: WHEREAS, the Richfield Housing and Redevelopment Authority desires to hire the Consultant to render certain technical, professional, and marketing assistance in connection with such undertakings of the HRA. NOW THEREFORE, the parties hereto do mutually agree as follows: I. Scope of Services. The Consultant ~hall provide technical rehabilitation advisory services, loan administration and fundraising for the Programs as follows: A. Provide HousingResource Center services, as directed by the HRA, to residents of the City of Richfield out of its Southside Minneapolis office with scheduled visits to residences when needed and providing staff at City Hall as needed. These services include the following: 1. Administer home improvement programs including the MHFA Fix Up Fund, Community Fix Up Fund, the MHFA Rental Rehab program and the MHFA Rehabilitation Loan Program; 2. Provide construction management services including home inspections to homeowners considering rehabilitation, preparing scopes of work, educating homeowners on the construction bid process, evaluating bids and work completed to ensure quality and cost effective renovations and monitoring the construction process; 3. Provide housing information to residents including information on emergency assistance, housing rehabilitation, first time homebuyers and limited rental information; II. Term. This Agreement shall be effective from January 1, 2007 and shall continue through December 31,2007. This Agreement can be terminated by either party with a 30-day notice. III. Compensation. The fee for service by the Consultant will be $7,000. Payment of such fee shall be made by invoice from GMHC. IV. Insurance. During the term of this Agreement, the Consultant shall obtain and maintain workers compensation, comprehensive general liability, and automobile liability insurance. Comprehensive general liability insurance shall have an aggregate limit of $2,000,000. Upon request by the HRA, 5,-~ the Consultant shall provide a certificate or certificates of insurance relating to the insurance required. V. Indemnification. Each party shall indemnify and hold harmless the other party and it's officials, agents, and employees from any loss, claim, liability, and expense (including reasonable attorney's fees and expenses of litigation) arising out of any action of such parties in the performance of this Contract. VI. Assianment. This Agreement shall not be assigned, sublet, or transferred without the written consent of the HRA. VII. Conflict of Interest. The Consultant agrees to immediately alert the Community Development Director of possible contractual conflicts of interest in representing the HRA, as well as property owners or developers on the same project. Conflicts of interest may be grounds for termination of this Agreement. THIS AGREEMENT was adopted by the Richfield Housing and Redevelopment Authority on the _ day of , 2007. ATTEST: RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY Its Chair THIS AGREEMENT was accepted by Greater Metropolitan Housing Corporation on the day of , 2007. WITNESSES: GREATER METROPOLITAN HOUSING CORPORATION, a nonprofit Minnesota corporation Its President AGENDA ITEM # 6 REpORT # 21 ..... STAFF REpORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING MAY 21,2007 REpORT PREPARED By: VANESSA HAIGHT, HOUSING SPECIALIST NAME, TiTLE REpORT PRESENTER: BRUCE P ALMBORG, COMMUNITY DEVEL MENT DIRECTOR DEPARTMENT DIRECTOR REVIEW: NAME, TiTLE REVIEWED By EXECUTNE DIRECTOR: ITEM FOR HRA CONSIDERATION: Authorization to allocate Apartment Remodeling Incentive Funds to the rehabilitation of Gateway Pointe Apartments. I. RECOMMENDED ACTION: By Motion: Consider authorizing the allocation of Apartment Remodeling Incentive Funds to @ Home Apartments for the rehabilitation of Gatewav Pointe Apartments. .. I II. BACKGROUND Funding for the Apartment Remodeling Program comes from Minnesota Housing Finance Agency (MHFA, a.k.a. Minnesota Housing) in the form of Apartment Remodeling Incentive Funds (ARIF). Currently, the HRA has $192,337 of unspent ARIF dollars. Remaining funds must be used by February 21,2008. The funds are available on a matching dollar basis at 0% interest, due and payable in 15 years or when the property is sold, whichever comes first. Some 37-apartment units have been renovated to date, resulting in an investment of $115,326 ($57,663 ARIF and an equal amount from property owners for an average investment of $3, 117/unit). Gateway Pointe Apartments, located at 75th and Lyndale Avenue, will soon be acquired by @ Home Apartments. The City Council recently approved a private 052107 Apartment Remodeling Reprogramming activity revenue bond for the purchase and rehabilitation of the property in the amount of approximately $15.4 million. Improvements are valued at approximately $3.5 million. A portion of the $3.5 million is equity from the buyer and the balance will be from the bonds. The rehabilitation plan includes new roofs, new entrYWays and windows, partial new siding, new laundry equipment, construction of garages, new exterior lighting, vanity and countertop upgrades, new flooring in many apartments, and interior light improvements. @ Home Apartments is seeking to alter the market perception of these apartments and have a greater diversity in the quality of apartments as well as in the rent. @ Home Apartments has expressed interest in ARIF dollars to be used toward landscape and ground improvements. The current budget is minimal for these types of improvements. Additional funds could greatly enhance the landscaping. Mike Cashill, President of @ Home Apartments, has indicated that should they receive all available funds, the improvements will include planting of trees in the parking lot area, substantial landscaping along Lyndale Avenue and plantings around each building entrance. The HRA approved guidelines for the Apartment Remodeling Program limit the maximum amount of ARIF dollars per property to $50,000. The HRA can forgo this maximum and allocate the remaining ARIF dollars, $192,337, to the rehabilitation of the Gateway Pointe Apartments. If the HRA does not wish to allocate the remaining funds to the Gateway Pointe Apartments rehabilitation, the maximum of $50,000 could be allocated to the project and the remaining $142,337 would be available to other rental property owners through February of 2008. I III. BASIS OF RECOMMENDATION I I A. POLICY I . One of the HRA's priorities is to improve apartment communities. . Proposed improvements to Gateway Pointe will help reposition the units in the marketplace and make them more competitive . It will also help update the image of the community as well. I B. CRITICAL ISSUES I . MHFA is very interested in helping to assure a positive outcome to the rehabilitation of Gateway Point and its repositioning in the market. They strongly endorse the use of ARIF "funds for the undertaking. . The HRA can choose to dismiss the $50,000 maximum per property and allocate the remaining funds to this project. . Without the ARIF dollars, @ Home Apartments will be forced to limit the amount of landscape and grounds improvements made to the property. IC. FrnANC~L I . The HRA has a balance of $192,337 in ARIF dollars that must be spent by February 21, 2008. . If ARIF dollars are allocated to the Gateway Pointe Project, Minnesota Housing will disburse the funds directly to the project and will perform all due diligence. Staff will work with Minnesota Housing to approve the scope of work. I D. LEGAL I . Allocating the remaining ARIF dollars to the Gateway Pointe project is permitted by the Agreement between MHFA and the HRA. I IV. ALTERNATivE RECOMMENDATION(S) I . Allocate an alternative amount of ARIF dollars to @ Home Apartments. I V. ATTACHMENTS . None I VI. PRINCIPAL PARTIES EXPECTED AT MEETING I . Mike Cash ill, President @ Home Apartments AGENDA ITEM # 7 REpORT # 22 ~ STAFF REpORT RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MEETING MAY 21, 2007 REpORT PREPARED By: VANESSA HAIGHT, HOUSING SPECIALIST NAME, TITLE REpORT PRESENTER: BRUCE P ALMBORG, COMMUNITY DEVELOPMENT DIRECTOR DEPARTMENT DIRECTOR REVIEW: NAME, TITLE REVIEWED BY EXECUTIVE DIRECTOR: ,j ITEM FOR HRA CONSIDERATION: Discussion of mortgage foreclosure policy and program guidelines. I. RECOMMENDED ACTION: By Motion: Authorize staff to modify guidelines for the mortgage foreclosure response program. I II. BACKGROUND I In September of 2006 the Housing and Redevelopment Authority (HRA) authorized an administrative process for responding to mortgage foreclosures (see attached). Through the HRA's first action to redeem a lien, it has come to staff's attention that additional policy guidelines are needed. Specifically, staff would like direction and feedback on five areas: 1) Pursuance of redemption. Redemption should only be pursued when the potential resale price exceeds the estimated costs of redemption, rehabilitation, and sale. 2) Sale of property to former owner. In early 2007, the HRA redeemed its lien on 7422 4th Avenue. After the HRA became owner of the property, the former owner approached the HRA about buying the home back. The HRA rejected that proposal at a special meeting on Tuesday, May 8th. A prohibition on sale to the former owner should be incorporated into the guidelines. 052107 Foreclosure Policy 3) Sale price of rehabilitated property. The rehabilitated homes at a minimum would be sold at a price to cover HRA costs. Should the further objective be to maximize the sale price to obtain additional funding for housing programs or should they be priced to be affordable at 80% AMI (Area Median Income of $59,600 for a family of four, for example) or should the decision be made on a case by case basis? 4) Extent of rehabilitation. Rehabilitating the homes to meet Point of Sale requirements is suggested. This level of rehabilitation will ensure a safe living environment for the future homeowner and conserve HRA resources. A copy of the Point of Sale form is attached. 5) Administration of rehabilitation element. Staff has the knowledge to facilitate and coordinate the rehabilitation of the home(s), market the home(s), and facilitate the sale of the home(s). Legal counsel will also be utilized during the resale process. After receiving direction from the HRA, staff will redraft program guidelines and return them to the HRA for approval. The guidelines will be more focused on policy perspective. Currently much of the focus is process. I III. BASIS OF RECOMMENDATION I I A. POLICY I . The HRA authorized an administrative process for responding to mortgage foreclosures and established a revolving fund for foreclosure redemption. I B. CRITICAL ISSUES I . The current foreclosure process is not comprehensive enough to direct staff on specific program details. Staff seeks HRA input on modifications to program guidelines. I C. FINANCIAL I . The resale price of the rehabilitated home(s) must be high enough to cover the costs incurred during the redemption and the rehabilitation costs. . The HRA could choose to sell the homes at an affordable price when finances permit or sell at market value to maximize the funds available to support housing programs. . I D. LEGAL I . Legal counsel has been an ongoing resource as each foreclosure notice is reviewed and actions are taken to redeem. I IV. ALTERNATIVE RECOMMENDATION(S) I . Do not authoriz'e staff to develop program guidelines. . Recommend alternative guidelines mortgage foreclosures. I V. ATTACHMENTS I . A summary of foreclosure response options when the City/HRA has a mortgage interest (approved September 2006). . Point of Sale inspection form. I VI. PRINCIPAL PARTIES EXPECTED AT MEETING . N/A '7-[ A Summary of Foreclosure Response Options when City/HRA has a Mortgage Interest or when a Program Opportunity Exists The following are the steps that would be taken for the referenced options: 1) Purchase/Rehab/Sell Purchasing the property could occur in either of two ways: a) Submit a bid at the sheriff's sale for the amount of liens that are senior to the City/HRA: . Typically the first mortgagee will bid in the amount of its mortgage. . If the HRA wants to obtain the property at the sale, it would have to bid in an amount sufficient to payoff the old mortgage plus any taxes and the costs of the sale. . The HRA then would become the owner of the property, subject to rights of redemption of the owner and junior lien holders. . Typically the owner has six months to redeem, but that time can be shortened to five weeks if the property has been abandoned and the mortgagee obtains a court order for a reduced redemption period. Junior creditors (if there are any) have the right to redeem within seven days after the expiration of the mortgagor's redemption period. . The amounts that have to be paid to redeem include interest on the amount that the HRA would have paid for the property, plus any costs the HRA has incurred for taxes or to prevent waste on the property. If no one redeems, the HRA would become the owner. b) Redemption after the sale. . The HRA needs to file a notice of intent to redeem if it chooses this option. . If the mortgagor redeems, the HRA's mortgage is reinstated. . If the mortgagor does not redeem, then the HRAwill have to come up with the money to payoff the first mortgagor (and, if there are any other mortgages or liens prior to the HRA's mortgage and those creditors redeem, then also payoff those liens) in order to get title to the property. If the HRA decides to purchase the property, there are two ways to structure the purchase: a) HRA purchases coordinates and pays for rehab, then sells to recover costs. b) HRA purchases, conveys to non-profit for rehab, recovering costs and the non-profit sells. 1.) In this option, the non-profit is responsible for the cost of rehab. 2.) The non-profit would be required to sell to a moderate-income buyer. 3.) The sale would reimburse the nonprofit for rehab costs. 4.) The sale would reimburse the HRA for cost of acquisition and for the original lien amount. An example using numbers from a recent foreclosure notices. Assume HRA lien amount of $12,500: 052107 Foreclosure Policy '7 ~ ;;.. . HRA acquires for $121,000 (which includes the foreclosed lien and remaining liens on the property). . HRA conveys to non-profit for the cost of acquisition. . Non-profit rehabs for approximately $50,000. . Non-profit sells for approximately $200,000. . The sale leaves $16,500 after reimbursement of costs including reimbursement of the HRA lien of $12,500. . The $16,500 gets split between the HRA and the non-profit. The HRA uses revenues from the transaction to pursue additional foreclosures and/or mortgage foreclosure prevention programs through Community Action for Suburban Hennepin (CASH). 2) Purchase/Demolish/Sell In some instances, the property in foreclosure may be a qualifying substandard dwelling that is in a condition that it should be demolished as substandard and by removal becomes a vacant lot for an affordable New Home or a Richfield Rediscovered home. The procedures described in the "purchase/rehab/sell" section of this attachment would apply. However, a vacant lot would be created and program procedures for New Home and Richfield Rediscovered would also apply in returning the property to the marketplace. 3) Prevention In every instance of foreclosure by advertisement, staff will: a) Contact the homeowner asking them what they plan on doing and inquire if they would like staff to contact someone at CASH for foreclosure prevention services. b) Contact someone at CASH and coordinate their connection with the homeowner, when requested. c) Support a foreclosure prevention through CASH as funds are available and approved by the HRA. NOT OK approved N/A EXTERIOR Comments: 0 0 0 1. Electrical outlets/ fixtures/ overhead service 0 0 0 2. Stairs, decks, porches, railings 0 0 0 3. Walls - siding, trim, etc 0 0 0 4. Foundation condition/ grade / Drainage 0 0 0 5. Windows (frames/ screens/ glass / glazing) 0 0 0 6. Doors 0 0 0 7. Roof covering and flashing 0 0 0 8. Chimneys and vents (dryer/ furnace/ bath) 0 0 0 9. Flue (metal! Transite) 0 0 0 10. Plumbing- back-flow prevention 0 0 0 11. Fence / shed(s) 0 0 0 12. Debris 0 0 0 13. Shed-condition Comments: NOT OK approved N/A GARAGE 0 0 0 13. Roof structure and covering 0 0 0 14. Wall structure and covering (exterior) 0 0 0 15. Overhead garage door (operation / reversing) 0 0 0 16. Electrical outlets / fixtures/ wiring 0 0 0 17. Gas-lines and valves 0 0 0 18. Fire separation 0 0 0 19. Heaters Comments: NOT 1ST 2ND OK approved N/A INTERIOR ROOMS ON LEVEL: FLOOR FLOOR 0 0 0 20. Plumbing fixtures, kitchen 0 0 0 21. Electrical outlets/fixtures/wiring - kitchen 0 0 0 22. Plumbing fixtures, bath / number _ 0 0 0 23. Electrical outlets/fixtures/wiring, bath 0 0 0 24. Gas lines and valves 0 0 0 25. Auxiliary heaters - installation and wiring 0 0 0 26. Wood-burning appliances 0 0 0 27. Fireplaces 0 0 0 28. Floors and rooms - construction 0 0 0 29. Electrical outlets / fixtures wiring other rooms 0 0 0 30. Light and ventilation - windows 0 0 0 31. Sleeping rooms 0 0 0 32. Smoke detectors (presence, location, operation) 0 0 0 33. Walls and ceiling components 0 0 0 34. Stairs and railings (to upper floors) 7-3 ADDRESS OF EVALUATED DWELUNG: r;-L-f Comments: NOT OK approved N/A INTERIOR: ATTIC SPACES (IF ACCESSIBLE) 0 0 0 35. Rafters, sheathing, ventilation 0 0 0 36. Evidence of staining or seepage 0 0 0 37. Electrical outlets / fixtures / wiring NOT OK approved N/A INTERIOR: BASEMENT 0 0 0 38. Stairs- railings, landings, steps 0 0 0 39. Floor 0 0 0 40. Foundation walls 0 0 0 41. Columns and beams 0 0 0 42. First floor structural systems 0 0 0 43. Floor drain and its cleanout 0 0 0 44. Water supply piping 0 0 0 45. Plumbing fixtures 0 0 0 46. Bathrooms: number 0 0 0 47. Drain waste and vent piping 0 0 0 48. Heating system installation 0 0 0 49. Water heater installation 0 0 0 SO. Venting system of heating and water heater 0 0 0 51. Gas-lines and valves 0 0 0 52. Fireplaces 0 0 0 53. Electrical service: AMPS 0 0 0 54. Electrical outlets / fixtures / wiring 0 0 0 55. Smoke detectors 0 0 0 56. Sleeping rooms(s) NOT OK approved N/A MISCELLANEOUS o 0 0 57. Miscellaneous, including abandoned fuel tanks o 0 0 58. Sanitation NO YES N/A CERTIFICATION BY LICENSED CONTRACTOR o 0 0 59. Certification of the heating system required? o 0 0 60. Certification of the water heater required? o 0 0 61. Certification of the plumbing system required? o 0 0 62. Certification of the electrical system required? o 0 0 63. Certification of the roofing system required? o 0 0 64. List other certifications required: I Iospected by: Date: