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06-21-93 agendaCITY OF RICHFIELD HOUSING AND REDEVELOPMENT AUTHORITY MONDAY, JUNE 21, 1993 7:00 P.M. COUNCIL CHAMBERS AGENDA CALL TO ORDER APPROVAL OF MINUTES OF (1) HRA HELD CONCURRENTLY WITH .SPECIAL CITY COUNCIL MEETING OF APRIL 19, 1993 AND (2) HRA MEETING OF MAY 17, 1993 ' 1. OPPORTUNITY FOR CITIZENS TO ADDRESS THE HRA ON ITEMS NOT ON THE AGENDA 2. PUBLIC HEARING AND CONSIDERATION OF RESOLUTION AUTHORIZING SALE OF HRA OWNED PROPERTY AT 6803 NICOLLET AVENUE HRA LETTER NO. 25 3. CONSIDERATION OF RESOLUTION AUTHORIZING ACQUISITION OF 7112 FIRST AVENUE AND REQUEST CITY COUNCIL TO CONSIDER ACQUISITION AND DISPOSITION OF SITE TO HRA HRA LETTER NO. 26 4. UPDATE AND DISCUSSION REGARDING PROJECT DIRECTION AT 6636 SHERIDAN AVENUE HRA LETTER NO. 27 5. CONSIDERATION OF AUTHORIZATION TO CONTINUE RICHFIELD REDISCOVERED PROGRAM HRA LETTER NO. 28 6. EXECUTIVE DIRECTOR REPORT 7. 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 ADMINISTRATIVE SERVICES DIRECTOR AT 861-9702. HOUSING AND REDEVELOPMENT AUTHORITY HRA Letter No. 28 Agenda June 21, 1993 Issue Statement: Authorization to continue the Richfield Rediscovered Program. Backcrround At the May•meeting, in HRA Letter No. 21, staff indicated an additional•$360,000 in funding for Richfield Rediscovered was needed. Program demand and momentum are strong. Since the beginning of the program, just about two years ago, 27 properties have been completed or initiated. All available funds have been committed. A plentiful supply of sellers have offered 40 substandard homes. Approximately 70 interested home buyers have contacted staff this spring about new home development opportunities. The $360,000 would be utilized as follows to redevelop six properties: Acquisition $294,000 Demolition S 30,000 Program Administration $ 36,000 (Marketing, inspection, title work, seller/builder closings, general administration/legal) Total 5360,000 Proceeds from land sale (returned to the account in 1994) (-)5145,800 Net Program Expense (Tax Increment) $214,200 Recommended Motion: Authorize the expenditure of 5360,000 ($214,200 net) from the development .account to continue the Richfield Rediscovered program. Basis of Recommendation: 1. The Richfield Rediscovered Program has been successful. 2. The program has established a presence in the market place and the momentum must be continued. There is a voluntary market of sellers approximating 40. The voluntary market of builders/buyers approximates 70. 3. A source of funding, the development account, has been identified. 4. Tax increment analysis indicates the program cash flow continues to be positive. 5. Authorization at this time would permit a supply of homes through the spring of next year. Alternative Recommendation: Do not authorize a program at this time. Discussion/Decision Mode: Some properties already have builder/buyer teams and development plans ready for when lots become available. Additional sites could be ready for redevelopment by early fall. Respe t lly submitted, James Prosser Execut ve Director JDP:cak HOUSING AND REDEVELOPMENT AUTHORITY HRA Letter No. 27 Agenda June 21, 1993 Issue Statement: Update and discussion regarding project direction at 6636 Sheridan Avenue. Background: The HRA purchased the property at 6636 Sheridan on March 24, 1993 for 564,814. The HRA has requested staff to evaluate rehabilitation before pursuing demolition. The City Council continues to express interest in demolition and new construction. (The City Council provided the acquisition funds for the HRA purchase.) As a part of the purchase process, the prior owner, Richard Cash, removed-three double tandem truck loads of household goods and junk. The nuisance conditions and property maintenance violations have stopped. However, the neighborhood remains uncertain and concerned about the future of the property. The house has been vacant for approximately two months. Staff has been inspecting the home and devising a Scope of Work for interior and exterior improvements, a time consuming process. The three bedroom rambler was converted by Cash to a two bedroom split entry home. The home has limited potential to expand beyond two bedrooms and still be a desirable living space for a family. The exterior design is incomplete with limited appeal in comparison. to the nice homes in the neighborhood. Staff has evaluated the property for either rehabilitation or new construction. The redevelopment options are summarized on the attachment. Staff is at a decision point: work closely with a contractor from the prepared scope and plans and finalize estimates in preparation for a formal bidding process, or initiate a sale to a builder/buyer team to develop a new, higher value home on the site with a Richfield Rediscovered approach. Recommended Motion: Discuss at the Board meeting whether to: 1. continue to pursue rehabilitation; or 2. pursue new construction. In preparation for the discussion, tour the home at 6636 Sheridan between 4:30 p.m. and 7:00 p.m. on Monday, June 21, 1993. Basis of Recommendation: 1. A tour of the home will provide additional information and insight that would be helpful to the discussion. 2. A decision point has been reached; commit significant staff resources to coordinate rehabilitation, or pursue a less staff intensive new construction initiative. 3. Rehabilitation has merit. The basic frame and foundation of the house are sound. However, a significant rehabilitation with a preliminary estimated cost of 555,460 is needed to overcome the functional and economic obsolescence. This is an initial staff estimate. A formal inspection and bidding process by private contractors is needed to identify a more specific number and identify potential hidden costs. Rehabilitation yields an 580,000 to 585,000 two bedroom home. 5. New construction has merit. A demolition bid has already been secured. A builder/buyer team has already indicated interest in redevelopment (see .attached letter). New construction yields higher property taxes over time. A home valued at $130,000 is envisioned. Replacement of the existing home by a new home may be psychologically more beneficial to the neighborhood. 6. The net cost for either approach is very similar: - Rehabilitation net cost: $35,274 - New Construction net cost: 535,514 Alternative Recommendation: Do not make a decision at this time. Staff would arrange for at least one contractor to bid in accordance with plans and specifications to help further define rehabilitation project costs. Delaying the decision prolongs the existing conditions. Discussion/Decision Mode: A rehabilitation or new construction project will take approximately four months to complete. But for rehabilitation, the formal bidding process would require an additional two months. For new construction, the HRA would hold a public hearing and authorize the sale and development agreement with a builder/buyer. y submitted, . Prosser ve Director JDP:cak Rehabilitation Proposal 663fi Sheridan Summary of Improvements Inspections have noted a strong and penetrating pet odor and deteriorating conditions. Rehabilitation has three components. One resolves building, health and safety concerns. A second component makes repairs to systems and conditions. A third component improves livability and value. These repairs and improvements would provide a home that more closely matches the $80,000 to 590,000 homes already in the neighborhood. The objective is to provide a house product that will not have recurring problems one to five years into the future for a buyer. Activity Repair blight conditions (electric, plumbing,.. heating, walls, doors, windows, floors, bathroom, insulation, grade, siding, trim) Make repairs and improvements which return home to quality of neighborhood and ready home for sale. (Complete partially finished construction, remodel kitchen, remodel bath, install maintenance free siding and trim, roof repair, new electric fixtures, replace windows and doors as necessary, install landscape materials). Add windows, roof gable, closets, finish lower level space, according to plan. Detailed inspection, preparation of scope of work, formal competitive bidding, awarding of bid, monitoring of rehabilitation to completion, marketing and sale of home upon completion. Holding costs during rehabilitation. Closing and marketing expenses. Cost 518,931 $20,229 $ 7,500 $ 6,000 (in-kind housing staff) $ 1,300 $ 1,500 Total Estimated Rehabilitation Cost (plus*) $55,460 (Continue on next page) Outcome: A 2 bedroom single family home valued at approximately $85,000. Rehabilitation after competitive bidding, would require 3 to 4 months. A home might be ready to market before the end of 1993. Homestead property taxes would approximate 51,100 annually after sale to an owner occupant. Approximately $850 is presently received annually. Summary of Transaction: Purchase by HRA: $64,814 Project Cost: 555,460 Total Cost (plus*) 5120,274 Proceeds of Sale: $85,000 Estimated Net Cost: $35,274 *Additional Comments.: Estimates are considered the minimum scope of work. The basis for these estimates is ongoing similar rehabilitation work performed on homes through various HRA, Vo- Tech-and rehabilitation loan programs. The in-kind staff commitment is more time intensive than new construction. Staff is assuming a new project of considerable scope which was not previously planned even though a private contractor is performing the rehabilitation. The most significant cost unknowns that can't be entirely planned for are: 1. The extent to which flooring, subflooring, walls and cabinetry must be removed and replaced to rid the home of penetrating odors and stains of pets. Cats and dogs have severely stained the floor underlayment and used the particle board based kitchen cabinet for napping. 2. The extent to which two existing layers of siding underlayment and framing must be removed to repair visible exterior moisture problems and rot. 3. Only 57,500 of the estimated $55,460 rehabilitation cost might be considered value added improvements. A home with a value of 577,500 might be transformed into a house of $85,000. -_ Y yy~ ![( ty.~~~ ` t t~. 4 <~ T 4 £ ~ ~i {~ i ~4tir~iyi ! }i~ . ~-fie} 3 ski}~sTit~, 4 rite sd~yt:t ~~~~ t, c i~ 7 j} J ~~ ~~ 0 (1 D r~ I z~ of w z ~' ~~ V -. -.~ ~_ c~ ~G B1 ~a~r~.ng~~n, Minne~~~~ 54~~ June 11, 1993 Mr. Bruce Nordquist Housing & Redevelopment Authority City of Richfield 6700 Portland Avenue South Richfield, Minnesota 55423 RE: 6636 Sheridan Avenue South, Richfield Dear Bruce, After our meeting of a few days ago, I stopped and viewed the above home once again. The Iarge two car garage would certainly have value to those persons who will accept a detached garage, of which I have a prospect that I am working with now who has seen this property and would accept a detached garage. I feel that the additional value the garage adds to the lot verses if it was not there at all is between $4,000 to $5,000. The garage does need to have a new exterior including siding, soffits, garage doors, window and so forth. The basic structure from what I was able to see from the exterior including the foundations looks excellent. This site would be an excellent site on which to sell and build a new home. If it becomes available for that use, I would appreciate your letting me know. Sincerely, MARLIN GRANT HOMES, INC. Marlin D. Grant Preside t MDG:lmw HOUSING AND REDEVELOPMENT AUTHORITY HRA Letter No. 26 Agenda June 21, 1993 Issue Statement• Authorization to acquire 7112 First Avenue and request the City Council to consider the acquisition and disposition of the site to the HRA. Background: The HRA utilizes the Voluntary Acquisition Program and CDBG funds to acquire substandard or underutilized residential properties for redevelopment. The South Hennepin Vo-Tech has developed these sites with new housing units for moderate income families. The structure at 7112 First Avenue is substandard in size and condition. An independent appraiser from BCL Appraisals, Inc. valued the property at $36,000. Staff has negotiated a purchase price of $36,000 pending authorization by the HRA and City Council. Year XIX (1993-94) CDBG funds are available for this purchase. HUD rules require that the City purchase the property for fair market value, 536,000. The subsequent transfer of the property to the HRA would require a 51.00 payment. The City Council could consider the purchase of the property on June 28, 1993 if requested by the HRA. The sale from the City to the HRA requires a public hearing and passage of a transitory ordinance. The existing house is currently vacant, and owned by Grace Church of Richfield. The Vo-Tech is ready for the site in late August. Staff is finalizing plans and a contract for development. The HRA would review the development plans and agreements in August. The lot has an area of 5,880 square feet and dimensions of 50' x 118'. This area is approximately 120 square feet smaller than the 6,000 square feet required by ordinance for a lot to be buildable. Staff is arranging for the Hearing Examiner to review the situation. HRA and-City Council actions are contingent on Hearing Examiner approval of a lot size variance. The Hearing Examiner has supported similar situations in the past. The HRA would be responsible for property maintenance following acquisition and site clearance following transfer of the property from the City. The 1993 budget provides 54,500 to clear the site (source: CDBG XIX), 5600 for legal work to acquire (source: CDBG XIX) and $200 for property maintenance and insurance (source: proceeds of sale of 1993 Vo-Tech project). It is anticipated that Vo-Tech could build a new house on site starting in fall 1993. Recommended Motion: It is recommended that the HRA: 1. Request the City Council on June 28, 1993 to consider-and authorize acquisition of 7112 First Avenue; including the first reading of an ordinance for the disposition of the property to the HRA. This action is contingent on a Hearing Examiner granting of a variance due to lot size. 2. Adopt the attached resolution which authorizes the Chairperson and Executive Director to enter into a purchase agreement with the City and take other actions necessary to acquire 7112 First Avenue for $1.00. Basis of Recommendation: 1. The owner is interested in selling to the City through the Voluntary Acquisition Program. 2. The property qualifies for acquisition in accordance with the Voluntary Acquisition Program guidelines. 3. Funds have been budgeted for acquisition, clearance and maintenance. 4. The Planning Commission has determined that the acquisition and disposition of this property for single family purposes would be in conformance with the Comprehensive Plan. 5. HUD rules require a process in which the City acquires the property and transfers the property to the HRA. 6. Arrangements are being made for the Hearing Examiner to consider a lot size variance on July 20, 1993 which would allow development. Similar requests have received a variance. 7. Vo-Tech will need another site for student training beginning this fall. Alternative Recommendation: The HRA can choose not to acquire the property. Discussion/Decision Mode: Pending HRA and City Council authorization, the property could be acquired after a favorable July 20 Hearing Examiner evaluation of a variance. Vo-Tech is anxious to identify the site to be used beginning this fall. Respe f ly submitted, James D Prosser Execut' a Director JDP:cak RESOLUTION NO. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD AUTHORIZING THE ACQUISITION OF 7112 FIRST AVENUE WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota (HRA) acquires property and builds and rehabilitates structures for residential purposes; and WHEREAS, the HRA desires to acquire the real property at 7112 First Avenue, legally described as: Lot 4, Block 2 Sheldon Blair's Wooddale Fourth Addition; and WHEREAS, the owner of 7112 First Avenue, Grace Church has volunteered to sell the property for $36,000; and WHEREAS, Community Development Block Grant (CDBG) funds will finance the acquisition of this parcel; and WHEREAS, the Planning Commission has made a finding that the acquisition and disposition of this parcel for residential purposes is consistent with the Comprehensive Plan, and WHEREAS, the acquisition is contingent on initial acquisition by the City of Richfield and a favorable consideration by the Richfield Hearing Examiner as to a lot size variance request. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota, as follows: 1. The Executive Director is authorized to request the City Council to consider the purchase of 7112 First Avenue for $36,000 utilizing CDBG funds and contingent on a favorable finding by the Richfield Hearing Examiner to a lot size variance request. 2. The HRA Chairperson and Executive Director are authorized to take necessary actions to purchase the property located at 7112 First Avenue for $1.00 from the City of Richfield. Adopted by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 21st day of June, 1993. Thomas E. Harms, Chairperson ATTEST: Lawrence Wozniczka, Secretary New Construction Proposal 6636 Sheridan Summary of Improvements The existing single family home would be removed. A builder/buyer team would be identified to develop a new single family home with: 3 or 4 bedrooms, 2 bathrooms, maintenance free exterior, a house design complimentary to the neighborhood, and a finished landscape. Activity Demolition of structure (garage would be retained and renovated by builder) Preparation for a closing to builder, development agreement, monitoring of demolition and construction, and builder sale to buyer. Holding costs prior to sale to builder Closing expenses with builder Total Estimated New Construction Cost: Cost $5,.000 52,000 (in-kind housing staff) $ 200 S 500 $7,700 Outcome: Anew single family property valued at 5130,000. New construction., after a builder/buyer is identified requires 3 to 4 months and provides a home ready to occupy before the end of 1993. .Homestead property taxes would approximate $2,400 annually after sale to an owner occupant. Approximately 5850 is presently received annually. Summary of Transaction: Purchase by HRA: 564,814 Project Cost: S 7 X700 Total Cost: $72,514 Proceeds of Sale (lot and garage:): Estimated Net Cost: $35,000 $35,514 Additional Comments: The Richfield Rediscovered program is presently underway and this site could be added to existing work assignments with little difficulty. Project cost estimates have minimal unknowns. Builder/buyer interest in this site is already indicated. HOUSING AND REDEVELOPMENT AUTHORITY HRA Letter No. 25 Agenda June 21, 1993 Issue Statement: Public hearing and sale of 6803 Nicollet Avenue. Background: The construction project at 6803 Nicollet Avenue was authorized by the HRA in June 1991, as a cooperative project with Vo-Tech. The project is completed and a sale is anticipated by August 1993. The selected purchaser is a three member, income qualified family seeking to reside near the wife's parents who live in Richfield. Presently, the family is renting an apartment in Eden Prairie. They responded to a Star Tribune advertisement. They meet the requirements stated in Attachment A. HRA authorization and a public hearing authorizing the sale of the property is required prior to final processing. The home is being sold for 585,500. The purchasers are making a down payment of 54,050. They have applied for a MHFA mortgage in the amount of $76,950. The difference between the initial purchase price and the estimated market value, 54,500, is provided by the HRA as a second mortgage. Project costs are covered by the buyers down payment and first mortgage. The second mortgage accomplishes the following: 1. Makes the initial purchase price affordable. 2. Prevents a speculative purchase in which the buyer might benefit from selling the home quickly. The HRA will pay up to 2-1/2 points for mortgage discounting (approximately 51,924) and the cost of title insurance (approximately $200) at closing. After closing, the Vo-Tech contract of 562,840 will be paid. These costs have been anticipated in the 1993 budget and will be paid by the proceeds of sale. If during final processing the family is found ineligible by the lender, the purchase agreement is void and earnest money will be released. At this time however, the lender has qualified the purchaser through the preliminary processing.. Fixtures and floor coverings have been installed. The HRA had an opportunity to inspect the completed work during an open house that was held April 26, 1993. Recommended Motion: It is recommended that following the public hearing, the HRA adopt the attached resolution which authorizes the disposition of the HRA owned property at 6803 Nicollet Avenue. Basis of Recommendation: 1. A qualified family has been identified as a purchaser and, meets program requirements. 2. A purchase agreement cannot be processed further by the lender without HRA authorization of sale. 3. A public hearing notice has been published in the Sun-Current which allows the HRA to consider the sale at the June meeting. 4. The Planning Commission has determined that the sale for residential purposes is consistent with the Comprehensive Plan. Alternative Recommendation: Do not adopt the resolution. However, this would cause a delay in the sale of the property, be very confusing to the buyer, and would increase HRA holding costs. Discussion/Decision Mode: Authorization of the sale is required at the June 21 meeting so that the buyers can finalize mortgage financing for a prompt closing. Resp tfully submitted, Jam D. Prosser Exe tive Director JDP:cak RESOLUTION N0. THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, MINNESOTA RESOLUTION AUTHORIZING SALE OF REAL PROPERTY LOCATED AT 6803 NICOLLET AVENUE WHEREAS, the Housing and Redevelopment Authority (HRA), owns certain real property located at 6803 Nicollet Avenue, legally described as: Lots 1 and 2, The Western Surety and Adjustment Company Addition "The Pines"; and WHEREAS, the HRA acquired the property so that the South Hennepin Vocational Technical College (Vo-Tech) could construct a new single family home at 6803 Nicollet Avenue, to be sold by the HRA to a moderate income family; .and WHEREAS, the Lam family has been identified as qualified purchasers for 6803 Nicollet Avenue; and WHEREAS the conditions of sale include a total sales price of 585,500; a-first mortgage of 576,950 payable to the lender; a lien of 54,500 payable to the HRA and 54,050 downpayment; and WHEREAS, the sale of 6803 Nicollet Avenue may be authorized by the HRA following a public hearing which considers the disposition of the property; and WHEREAS, that hearing has been held following proper publication of notice. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota that the HRA Chairperson and Executive Director are authorized to execute the purchase agreement and other required documents so that the disposition of HRA owned property at 6803 Nicollet Avenue occurs as presented herein. Passed by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota this 21st day of June, 1993. Thomas E. Harms, Chairperson ATTEST: Lawrence Wozniczka, Secretary ATTACHMENT A 6803 NICOLLET AVENUE SOUTH NEW HOME PROGRAM ELIGIBILITY REQUIREMENTS FOR HOME. BUYERS - Have a 3-6 member family (a family is defined as persons related by blood, marriage or operation of law). - Be a first time home buyer (or have not owned in 3 years). - Have the following maximum annual-income depending upon family size: Family Size Maximum Income 3 $35,700 4 $39,700 5 542,850 6 546,050 This income is 80$ of the metropolitan area median income - an accepted CDBG program income level. - Have the ability to make monthly payments on a 576,950 mortgage, pay $4,050 down, and pay closing costs required of the buyer. - Agree to be subject to a lien by the HRA for the difference between the initial sales price and the actual value.