08-29-88 agenda~`~'~'
CITY OF RICHFIELD, MINNESOTA
HRA LETTER N0. 29
August 29, 1988
Issue Statement:
Presentation of Annual Comprehensive Financial Report for fiscal
year ending December 31, 1987.
Baclkground •
The City's•auditing firm of Deloitte, Haskins & Sells has
completed the audit of the City's fiscal year ending December 31,
1987. That audit includes the financial transactions of the HRA.
A brief review of the financial report by City staff will be
presented at the regular HRA meeting in September in conjunction
with the 1988 Revised/1989 Proposed Budget.
If HRA members have any special concerns or questions concerning
the report those items should be forwarded to staff so that they
may be included in the September review.
Recommended Motion:
It is recommended that the HRA receive the Comprehensive Annual
Financial Report of the HRA for the fiscal year ending December
31, 1987.
Basis of Recommendation:
1. The City's auditor has performed an audit of the City's
& HRA's financial records for the year ending December
31, 1987 and is making a formal report of their
findings.
Alternative Recommendation:
1. The HRA could delay accepting the report until the
September meeting when the 1988/1989 budget is
presented.
®iscussion,~®ecision Mode:
Action on this item is suggested for the August 29, 1988 meeting.
Respectfully submitted,
?~,
am s D. Prosser
i y Manager
JDP:sae
PROCEDURAL GUIDE
RICHFIELD SECTION 312 REHABILITATION
LOAN FINANCING PROGRAM
au~usT. ~9ss
TABLE OF CONTENTS
I. INTRODUCTION
1. General Program Description
2. Loan Program Process/flow Diagram
II. DEFINITIONS
III. CONDITIONS GOVERNING ADMINISTRATION
1. Amendment Directives
2. Federal and State Regulations
3. Administrative Costs
4. Expediency of 312 Loan Processing
IV. GENERAL TERMS OF SECTION 312 REHABILITATION LOANS
1. Interest Rate
2. Maximum Loan Amounts
3. Minimum Loan Amounts
4. Borrower Fees
5. Minimum Monthly Payment
6. Loan Term
7. Incentive Grants
8. Use Of Loan Funds
9. Lien Priority
V. ELIGIBLE 312 LOAN COSTS
A. Costs which must be included in Section 312 - assisted
projects.
B. Items which may be included in Section 312 - Assisted
projects.
C. Special Requirements For Refinancing.
D. Items which must not be included in Section 312 Loans.
VI. RESPONSIBILITIES OF THE HRA
A. Outreach and Public Information
B. Initial Screening:
1. Determining Eligible Properties
2. Determining Eligible Borrowers
3. Determining Cost of Eligible Improvements
4. Determining If .312 Program Income Requirements Are
Met.
5. Determining Ability To Repay Section 312 Loan.
6. Using The Initial Determination Of Affordablity
7. Applicant Selection Criteria
VII. PRELIMINARY APPROVAL
VIII. DEALING WITH PRE-CONSTRUCTION AND CONTRACT ISSUES
A. Introduction
B. Identifying Qualified Contractors
C. Rehabilitation Standards
D. Inspecting The Property And Work Write-Up
E. Bids and Proposals - Insuring That Rehabilitation
Costs Are Fair and Reasonable
F. Construction Contract
IX. PREPARATION OF A BID PACKAGE
1. List of forms and document which must be included in
the bid package to Processing Agency.
X. FINAL APPROVAL AND NOTIFICATION TO BORROWER
XI. CONSTRUCTION INSPECTIONS, PROGRESS PAYMENTS AND OTHER
ISSUES ARISING DURING CONSTRUCTION
1. Introduction
2. Commencement of Work
3. Required Documentation On Work Progress
4. Inspections Required Prior To Payment
5. Progress Payment Held Back
6. Progress Payment to Construction Contractors
7. Changes In Scope Of Work
8. Final payment
9. Required Action If Work Is Incomplete or
Unsatisfactory
10. Warranties and Guarantees
11. Complaints and Disputes
12. Procedures If The Owner Declares The Contractor In
Default
13. Completion Of Jobs Where Funds Are Insufficient Due To
Contractor Default, Failure of Contractor to Honer
Warranty And The Like.
14. Referral To HUD Deferred List
XII. .OTHER PROVISIONS
XIII. APPENDIX
Income limits as of June 30th, 1988
Richfield Building, Housing and Construction regulations
Section 400.01 - 410.13 of the Richfield City Code
Richfield Zoning Ordinance, Section 515.11 - 515.15 and
540.07
Cost Effective Energy Standards, 24 CF12 Part 39
HUD Section 312 Rehabilitation Program Handbook ~~7375.01
RICHFIELD HRA SECTION 312
REHABILITATION LOAN PROGRAM
I. Introduction
GENERAL PROGRAM DESCRIPTION
The Section 312 Rehabilitation Loan Program provides loans at a
below market interest rate to eligible Richfield homeowners. The
program's goal is to preserve and revitalize neighborhoods by ,
bringing homes up to full code compliance and by helping
homeowners to improve the quality of their living environments.
The following Procedural Guides are adopted from the U.S.
Department of .Housing and Urban Development HUD Section 312
Rehabilitation Loan Financing Handbook. These guidelines outline
the administrative tasks and procedures which the Richfield HRA
and the contracted loan Processing Administrator must follow in
the delivery of Section 312 loans in the City of Richfield.
The flow chart on the following page summarizes the loan process
from initial application through loan closeout.
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Richfield HRA Section 312
Rehabilitation Loan Program
II. Definitions
A. "Amortization Effective Date", or "AED", means the first day
of the month in which the loan begins amortizing, as specified in
the promissory note, usually after the full loan amount has been
disbursed to the borrower and construction is completed. The
first payment is due on the first day of the first month
following the Amortization Effective Day.
B. "Borrower", means one or more individuals who receive
approval of a Section 312 Rehabilitation Loan. The borrower(s)
must (collectively) own the .property to be rehabilitated, and
each owner must execute the legal documents evidencing and
securing the loan.
C. "Bid Package", means the bid package consists of all
documents. listed below and explained in Section IX.
1. Bid and proposal sheet
2. Inspection report
3. Work write-up and instructions to bidder
4. Historical Preservation Review (if applicable)
5. Bid and Proposal Supplement
6. Addendum forms (if applicable)
7. Accepted proposal signed by contractor
8. Tabulation of bids form
9. Request for bid forms
10. Blank construction contract to be signed at closing
D. "Dwelling Unit", means a residential space, which after
rehabilitation, will qualify under the laws of the state and city
as a place of permanent habitation or abode for a family or one
or more individuals.
E. "Handicapped Person", means a person who has a permanent
physical condition which substantially impairs the ability to
function independently in a residential setting, or which
substantially limits a person's ability to become employed or to
participate in the community. A person with a condition such as
chronic emphysema, arthritis, heart disease and other "invisible"
conditions not requiring the use of devices to increase mobility
shall not be deemed a handicapped person, unless a licensed
physician verifies, in writing, that such person's condition does
substantially limit his/her ability to function independently in
a residential setting or to become employed or to participate in
the community.
F. "HUD", means the U.S. Department of Housing and Urban.
Development.
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r
G. "HUD 312 Handbook", means the HUD Section 312 Rehabilitation
Financing Handbook 7375.01, as revised) identifying all program •
requirements and procedures involved in the processing of a
Section 312 Loan and which"is adopted by reference. Where the
procedures conflict, the stricter requirement takes precedence,
as determined by the Richfield HRA.
H. "Incipient Deficiencies", means problems or defects with the
property which, if not corrected, would reasonably be expected to
deteriorate into actual deficiencies under the Rehabilitation
Standards within two (2) years.
I. "Initial Screening", means the preliminary determination by
the Richfield HRA as to whether a borrower appears to qualify for
a 312 Loan, based on information represented on the preliminary
app ication. Initial screening must be completed by the
Richfield-HRA prior to submission of a Section 312 application to
the Processing Agency.
J. Inspection Report", means a list of deficiencies and all
eligible Section.312 loanimprovements whichhas been prepared by
the Richfield HRA's designated inspector (Richfield building
official).
K. "Interest Rate", means the stated rate of interest charged to
borrowers on the outstanding principal balance of Section 312
Rehabilitation Loans. The interest rate is presently three
percent (3%) APR is determined by HUD. •
L. "Loan Administrator", Richfield HRA staff person (program
specialist responsible for carrying out the administrative tasks.
as identified in these. procedural guides.
M. "Low and Moderate .Income Famil ", means a family whose .total
(gross income does not exceed 80% of the median income for the
area asdetermined by HUD.
N. "Low and Moderate Income Person", means a person whose income
is within the limits ,defined in the definition of "Low-and-
Mo~derate Income Family".
0. "M~r", means that the item is not required, but that it is a
suggestion.
P. "Median Family Income", means the. median family income of tfie
metropolitah statistical area established by the Office of
Management and Budget.
Q. "Must", means that the item is a requirement, and that it is
mandatory that it be undertaken..
R. "Owner-Occupied", means a single family home owned by a
borrower whose 'principal residence is the dwelling unit on that •
property. Owner-occupancy applies only to individuals; property
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cannot be considered "owner-occupied" if the title is held by a
corporation or partnership, even if one of the partners or a
principal shareholder lives there.
S. "Preliminary Approval", means the verification of income,
assets, and property status by the Processing Agency to determine
if the borrower appears to be a good credit risk for a Section
312 Loan.
T. "Processing Agency", means the agency acting under a contract
with the Richfield HRA to perform certain administrative tasks in
relation to the Section 312 program loan processing, closing and
cash management on behalf of the Richfield HRA.
U. "Processing Agency Loan Officer", means the representative of
the Processing Agency handling the processing of an individual
borrower's Section 312 loan file.
V. "Rehabilitation", means the improvement or repair of an
existing structure, or the improvement or repair of facilities in
connection with an existing structure, and may include the
provision of such sanitary or other facilities as are required by
the Rehabilitation Standards. Rehabilitation may not include
work so excessive as to be equivalent to new construction or
reconstruction of the property, although "gut rehabilitation" may
be considered rehabilitation if necessary, at least in part, to
meet the rehabilitation standards.
W. "Rehabilitation Standards", means the rehabilitation code and
standards adopted by the Richfield HRA to identify eligible
improvements under the Richfield HRA Section 312 Program and as
described in Section VIII of these guidelines.
X. "Section 312 Rehabilitation Loan", or "Section 312 Loan", or
"312 Loan", means rehabilitation loan as authorized by Section
312 of the Housing Act of 1964, as ,amended (42 U.S.C. 14526).
Y. "Single-Family Property", means property devoted solely to
residential use and having a single dwelling unit after
rehabilitation.
Z. "Stable Monthly Income", means the borrower's verified gross
income that is likely to continue, based on foreseeable economic
circumstances.
AA. "Supplemental Financing", means any rehabilitation financing
necessary to complete the rehabilitation of the property other
than the Section 312 Rehabilitation Loan.
BB. "The Richfield HRA", means the Richfield Housing and
Redevelopment Authority (HRA) who in conjunction with the
Processing Agency, performs certain administrative tasks in
relation to Section 312 loans for property within the City of
Richfield.
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CC. "Work Write-Up", means the scope of work or-rehabilitation
spe-cification identifying in detail the improvements to be made
under a Section 312 assisted project.
r.
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III. Conditions Governing Administration
A. Amendment Directives
These Procedural Guides may be amended or supplemented from
time to time by HUD and the Richfield HRA by issuance of
pages, which shall be effective as of the date of issue, or
such later date as the amendment shall specify...
Administrative memoranda may also be issued which discusses
policy interpretations, clarifications of procedures and other
administrative matters.
B. Federal and State Regulations
Nothing in these Procedural Guides shall be construed in
such a manner as to conflict with, alter, or amend any
federal or state regulation applicable to the conduct of
the Richfield HRA's business affairs or functions.
C. Administrative Costs
All administrative costs of the Processing Agency and the
Richfield HRA will be funded by a special set aside of CDBG
funds and other revenues available to the Richfield HRA.
D. Exoediencv of 312 Loan Processin
All 312 Loans shall be processed in a reasonable length of
time and in an efficient and accurate manner. Normally, a
Section 312 loan shall be completed through final approval and
loan closing in 3 to 5 months. Construction schedules will be
determined on a case by case basis, generally not to exceed an
additional 9 months.
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IV. General Terms Of The Section 312 Rehabilitation Loans
Interest Rate•
The interest rate for an eligible borrower is three percent (3~).
This enables. homeowners of low .and moderate income to afford
financing to undertake necessary.rehabilitation improvements.
Maximum Loan Amounts:
The maximum loan amount for a Section 312 Rehabilitation Loan
cannot exceed the lesser of:
a) $33,500 per dwelling unit; or
b) The total cost o.f rehabilitation and refinancing
eligible under the requirements as stated in the
HUD Section.. 312 Handbook.
c) An amount which, when added to the outstanding
`indebtedness related to the property, creates
a total indebtedness which does not exceed the
loan-to-valueratios detailed in Chapter 7 of
the HUD Section-312 Handbook.
Minimum Loan Amountss
Funding for a Section 312 Loan may not be approved if the total
cost of improvements is less than $10,000. At a minimum, $6,000
must be applied to code related improvements for each .312 Loan.
Borrower Fees:
A11 borrowers are required to pay the following fees;
1. $10 Energy Audit Fee: A Richfield Home. Energy Check-tJp
energy audit must be performed prior to the property
inspection. The cost of `the audit is $10. The cost of
the audit will be billed to the borrower on his/her next
NSP,bill which follows the audit. Audits shall be
scheduled through the Richfield Energy Office at Richfield
City Hall. The audit will be a borrowers expense, not
to be reimbursed.
2'. Inspection Fee: All borrowers must pay an inspection fee.
The fee is presently $52 and must be collected prior to
the Richfield Building Official(s) visit. The fee
schedule is subject to change. This fee must be paid by
the borrower, directly to the Richfield Inspections
Department, Richfield. City Hall at the time. an inspection
is scheduled. .This fee must be paid and an inspection
completed following preliminary approval if an applicant
wishes to continue the Section 312 Loan process. The
inspection fee is an owners expense, not to be reimbursed.
3. There is no application fee for participation..
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Minimum Monthly Payment:
In order to help ensure that the. costs of processing and
servicing loans do not exceed the benefits, a Section 312 Loan
cannot be approved unless the monthly payment for principal and
interest on the Section 312 Loan is at least $55 per month.
Loan Term:
The term of the Section 312 Loan cannot exceed 20 years. In
general all Section 312 Loans are made with the shortest
reasonable term.
Incentive Grants:
In cooperation with the City of Richfield, the Richfield HRA
allocates CDBG funds to be used in conjunction with Section 312
financing. A CDBG funded "incentive grant" applied to
improvements fora Section 312 project, satisfies HUD's program
targeting requirements for Section 312 Loans in Richfield.
A $500 incentive grant, provided by the Richfield HRA, will
accompany each approved and closed loan. The grant funds must be
applied directly toward code related improvements. The grant
amount will be paid directly to the contractor by the Richfield
HRA, from the initial invoice received for improvement work on
the property. A request for payment for the remaining balance on
the initial invoice amount, if any, will be forwarded to the
Processing Agency for payment to the contractor. This incentive
grant does not create a lien on the property and requires no
payback.
Use of Loan Funds:
Upon completion of work funded by a Section 312 Loan, the
property shall be in full compliance with all Rehabilitation
Standards. Additional funds, not to exceed 40~ of the total
loan, may be used for general property improvements that do not
relate to code compliance. The amount of the incentive grant is
not to be included as a part of the total loan amount for this
purpose.
Lien Priority:
HUD's security interest in Section 312 Loans should be in as
senior a position as possible. However, if the loan meets the
acceptable risk underwriting standards in Chapter 7 of the HUD
312 Handbook, the security interest for a Section 312 Loan may be
junior to all other loans secured by the property with the
following exception: CDBG-funded loans secured by the property
must be junior to a Section 312 Loan.
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f
V. Eligible Section 312 Loan Costs:
A. Costs .which must be included in Section 312-Assisted
Projects and may be included in Section 312 Loans.
1. Rehabilitation Standards:
At a minimum, borrowers must complete all work necessary to
correct any deficiencies in the property under the
Rehabilitation Standards. This includes completing additions.
to the property, if necessary to meet Rehabilitation Standards
or to meet minimum living space requirements for current or
planned occupants. The cost for these items may be included in
a Section 3l2 Loah. (See :Section VIII foreadefinition of
Local Rehabilitation Standards).
2. Cost Effective Enerov Standards:
All properties.meet Cost Effective Energy Standards (as set
forth in 24 CFR Part 39). The Cost Effective Energy Standards
set forth energy conservation and efficiency standards- which
must be met, 'as.long as the modifications are financially
feasible and do not require work oh elements that would not
ordinarily become exposed during the rehabilitation. The cost
a sociated with meeting these standards may be included in a
Section 312 Loan.
a. Assessing Energy Needs:
r:
Each .applicant will be required. to have a Richfield Nome
Energy Check-Up energy audit performed following preliminary.
approval by the Processing Agsncy as described under
Borrower Fees in Section IV.
The results of this audit will be used to determine. what, if
any, improvements must be made to the property so that it
meets the Cost .Effective Energy Standards.
b. Required Work:.
If it is determined through the energy audit that
improvements must be made to the property so that it meets
the. Cost Effective Energy Standards, these improvements must
be made unless otherwise specifically determined by the
Richfield HRA.
3. Historic Preservation Standards.:
For all Section 312-assisted projects,. the Loan Administrator
must ascertain if the property is on the National Register of
Historic Places or eligible for inclusion on the National
Register of Historic Places. If so, the rehabilitation must be
done in accordance with standards set by the U. S. Secretary of
the .Interior, and the rehabilitatioh costs 'associated with .
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meeting these standards may be included in the Section 312
Loan. See Paragraph 12-8 of the HUD Section 312 Handbook for
additional information on historic preservation requirements.
4. Other Costs Which Must be Included in Section 312-Assisted
Projects, and Which May be Included in Section 312 Loans:
(a) The reasonable cost of rehabilitating the property
so that it conforms to environmental requirements.
(See Paragraph 12-8 of the HUD Section 312 Handbook for
additional information on environmental requirements).
(b) The cost of remedying the identified lead-based
paint hazards for the property. (See Paragraph 12-9
of the HUD 312 Handbook for additional
information on lead-based paint requirements).
(c) The cost of rehabilitating the property so it is
accessible to the physically handicapped. (See
Paragraph 12-12 of the HUD 312 Handbook
for requirements on making properties accessible
to the handicapped).
(d) The-cost of remedying structural problems caused
by termite infestation, and of eliminating the
infestation itself, if there is evidence of such
infestation, as determined by an inspection of the
property by the Loan Administrator and/or an
outside expert. In addition, if .the Building
Official determines as part of the property
inspection that it is possible that the property
has termite infestation, but is not qualified to
properly inspect the property for termite damage, a
termite inspection of the property from an outside
termite inspector or extermination company, may be
obtained. The fee for this termite inspection is an
eligible Section 312 Loan cost, so long as it is
reasonable and customary.
See Chapter 3 parag
additional costs to
must be included in
funds.
B. Items which May
and Section 312
raph 3-1 of the HUD 312 Handbook for
be calculated by the Processing Agency, which
projects assisted with Section 312 Loan
Be Included In Section 312-Assisted Projects
Loans•
Within the maximum loan amounts, Section 312 Loans may also
include the following:
(1) Removing Incipient Deficiencies. Section 312 Loans
may include the cost of rehabilitating the unit to
correct or remove incipient problems or defects which,
if not. repaired, would reasonably be expected to
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deteriorate into deficiencies of Rehabilitation
..Standards within two (2) years,. Borrowers should be
encouraged to include such work, but borrowers must not
be forced to do so. However, if the property will not.
be sound enough after the proposed rehabilitation to
be considered an acceptable underwriting risk, the
loan must-not be approved. This wily be determined by
.the Processing Agency in accordance with Chapter 7 of the
HUD Section 312-Handbook).
-(2) Making General Property Improvements
General Re uirements. General Property Improvements
ZGPI's are improvements other than the required
improvements listed in Part A of this section
or Incipient Violations. as described .above,
but which are nevertheless necessary to pint the .property
in a generally good and readily maintainable condition..-
General.Property Improvements ars eligible Section
312 Loan costs so. long as all required improvements
are. completed, and the General Property Lmprovements
are reasonable andcustomary for the area and..are
not considered luxurious. This would include fixtures,
equipment, or landscaping of a type or quality which
substantially exceeds that customarily used in the area.
The HUD Area Office Rehabilitation Management Specialist
will be consul ed if there are questions :about whether a
GPI is a luxury item, in sole determination. In
addition, the total cost of General Property Improvements
must not exceed 40 percent of .the total a mount of the
.Section 312 Rehabilitation Loan.
(a) Examples of Eligible GPI's.: Eligible. Genera l
Property Improvements include but are not limited to the
following:
(1)` Work which willresult in reduced maintenance
and/or will. extend the useful life of a part of
..the property..
(2) Work to-.expand livable space and eliminate
inefficient design, which may .include moving or
removing walls.
(3)
(4)
Installation of permanent work.-.saving elements
which are customary for the locality, such as
garbage disposals where permissible but not
required, built-in dishwashers, and other
permanent elements which benefit the health and
safety. of the residents of the property, such as
:security or fire protection systems.
Remodeling a kitchen, bathroom or currently under-
utilized space to improve efficiency, to modernize
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and/or to-make it aesthetically pleasing. This
may include kitchen appliances.
b. Encouraging Quality Repair:
The Loan Administrator should encourage borrowers to undertake
rehabilitation work that goes beyond the bare minimum of
correcting deficiencies in Rehabilitation Standards, so long as
they can afford the additional cost and the higher grade
materials and workmanship which are reasonable and customary for
the area and not a luxury item and the total cost of General
Property Improvements do not exceed 40 percent of the total
Section 312 Rehabilitation Loan. In encouraging these quality
repairs, the Richfield HRA will be helping to ensure that
improvements financed with Section 312 Loans have. as long an
economic life as possible, thereby contributing to the security
of the loan.
For instance, while a standard-grade linoleum might correct
deficiencies not meeting Rehabilitation Standards regarding
flooring, borrowers may use higher quality floor the if they so
desire as long as they can .afford the additional :cost and the
higher quality floor is reasonable and customary for the area and
the total cost of General Property Improvements does not exceed
40 percent of the total Section 312 Rehabilitation Loan.
c. Determining if GPI's Exceed 40~ of the Section 312 Loan:
For GPI's that are not required, in part, to correct deficiencies
or incipient deficiencies in the Rehabilitation Standards, the
entire cost of the improvement must be counted towards the forty
percent limit. When the GPI constitutes the use of higher grade
materials or workmanship, rather than the standard grade, to
correct deficiencies or incipient violations of the
Rehabilitation Standards, the cost of the GPI may be calculated
as the difference between the standard grade improvement and the
upgrade. For instance, if a property has deficiencies in
Rehabilitation Standards concerning flooring, and if the borrower
chooses to use a higher grade flooring to solve the problem
rather than the standard grade, and if the higher grade is an
otherwise eligible GPI, the cost of the GPI may be calculated as
the difference between the standard grade and the upgrade.
3. Land Acquisition:
The cost of purchasing a small parcel of adjacent land, but only
if required to bring the property into conformance with local
code requirements for minimum lot size and dimension, is an
eligible Section 312 cost.
4. Professional Services:
The reasonable and customary costs of architectural, engineering
and related professional service require in the preparation of
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rehabilitation plans, drawings,.-write-ups, or specifications of
.work, if those services are beyond those normally provided by the •
Richfield HRA or the borrower, are eligible Section 312 costs.
5. Processing & Settlement Costs:
The cost of processing and settling the loah, other than those
services normally provided by the Richfield HRA and Processing
Agency, and the. costs necessary to obtain security for the loan,
are eligible Section 312 costs. These. costs may include but are
not limited to:
a. The cost of building permits and related fees,
required to carry aut the proposed rehabilitation
work, if not included in contractors' bid.
b. Origihation fee, if the loan is originated by
a private financial institution.
c. .Credit Reports
d. Fees far acceptable title evidence, reasonable
corrective title work and other legal fees related
o giving HUD an acceptable title report.
e. Fees for: recording anal filing legal .documents. related
to the loan.
f. Appraisal fees
g. Fees-for an independent rehabilitation cost estimate.
-6. Contingency Reserve:
A contingency reserve fund will be included in the Section 312
Loan to cover unanticipated construction interest or construction
costs or to cover increases in other eligible loan costs. A
contingency reserve of ten percent (10%) of the total Section 312
Loan amount will be included in a Section 312 Loan.
The contingency will be used to cover .unforeseen.. expenses so that
default does not occur if additional work. is found to be
necessary and there is no source of funds. to pay for it. (.HUD
has no obligation to increase a loan beyond the amount approved
'~ and stated in the Promissory Note and, in fact, may be unable to
do so because of the statutory. loan limits.)
The Processing Agency will be responsible for calculating the
amount of the contingency reserve and adding it to other costs to
determine the .exact loan amount of the Section 312 Loan in
accordance with Chapter 7-3-a of the HUD 312 Handbook.
7. Reimbursement for Initial Premium for Hazard or
Flood Insurance:
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Section 312 funds may be used to reimburse a borrower
at or after loan settlement for an ..initial hazard
insurance premium paid just prior to loan
settlement, but only if this insurance is required
for the Section 312 Loan. (See paragraph 3-1-a-(2) of
the HUD 312 Handbook for additional information on
using Section 312 funds for hazard insurance,
paragraph 2-3-a of the HUD 312 Handbook for additional
information on qualifying, and paragraph 9-2-e HUD
312 Handbook for additional information about escrows
for hazard insurance premiums). Flood insurance is not
required for Section 312 loans as no designated flood
.zones exist in Richfield.
C. Refinancing:
If a borrower does not qualify .for a loan amount sufficient to
fund all deficiencies as identified by the Rehabilitation
Standards, then consideration must be given to alternative means
of financing the rehabilitation. `These alternative means may
include:
1. CDBG Deferred loan and/or;
2. State rehabilitation funds; or
3. Refinancing of borrowers' existing debt(s) with
Section 312 funds.
Under limited circumstances, the cost of refinancing an existing
debt secured by the property is an eligible Section 312 loan
cost. The purpose of refinancing is to allow owner-occupants who
are 80~ or below of median income with large existing housing
debt, who would be unable to afford a rehabilitation loan in
addition to this debt, to rehabilitate their home.
Refinancing must not be used if other sources of public or
private financing are available at terms and conditions
comparable to Section 312 funds. The Processing Agency will
evaluate the borrower's refinancing potential during the
preliminary and/or final approval process. If it is determined
that refinancing is desirable, the Processing Agency must adhere
to the following:
-Complete the Refinancing worksheet, or a comparable
form which includes all the requirements detailed in
paragraph 3-3b of the HUD 312 Handbook, and must sign
the form.
-Send the form to the Director of Community Planning and
Development in the HUD Field Office, along with a letter
requesting final approval. This may be included in the
loan approval package if Field Office approval of the
loan is otherwise required.
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-Where the Processing Agency has local loan approval
autfiority, the. Director of. Community Planning and
Development in the HUD. Field Office must respond, in
writing, to the PA before approval can, be given.
D. Items Which Must Not Be Included In Section 312 Loans.
The cost of the following items must not be financed with Section
312. Loan funds:
1. The cost of staffing or administering the loan program
by .the Richfield HRA or the Processing Agency.
2. Work. so excessive as to be equivalent to new
construction or reconstruction of the property. (This
does not exclude so-called "gut".rehabilitation of a
property ifnecessary, at least in part,. to meet
Rehabilitation Standards.)
3. Costs associated with other rehabilitation loans
which are. used together with Section 312 Loans,
including interest costs, settlement costs, and
loan fees.
4. Luxury items; i.e., fixtures, equipment, or landscaping
of a type or quality which substantially exceeds that
customarily used in the area for properties of the
same. general type as the property to be rehabilitated.
While the Richfield HRA should encourage. borrowers to •
undertake high quality construction, even if it .goes
beyond the Rehabilitation Standards, luxury. items are not
eligible. The repair or construction of swimming pools
(but not the .cost to fill in or eliminate a pool from the
property) is prohibited. The Loan Administrator will
contact the HUD Field Office for additional information
-on luxury items, as warranted.
5. Purchase, installation, or repair of furnishings of
any kind, or of personal property which does not add
to the-value of the real estate itself, excluding
refrigerators or ranges, or of trade fixtures such
as display cabinets. or machinery.
6. Payment of deliquent taxes or assessments related
to .the period before loan closing.
7. Funds to pay the borrower or family members residing
in .the same household for their labor.
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VI. Responsibilities of the Richfield HRA:
A. Outreach and Public Information
The Richfield HRA will be responsible for the promotion of the
Section 312 Loan Program at the local level. The Richfield HRA
must .exercise care in avoiding any advertising or outreach method
which may be deemed to systematically exclude. potentially
eligible applicants. Access to program materials may not be
denied to any person for any reason..
The program should include efforts to reach chose persons who
traditionally would not have been expected to apply for housing
programs. In order to develop an affirmative marketing program,
the Richfield HRA should review its normal outreach methods to
determine how the methods currently. in use can be improved to
reach out to persons who otherwise might not apply. for assistance
under the Section 312 Loan Program.
B. Initial Screening of Potential Borrowers
The initial screening process is intended to help the Loan
Administrator make a preliminary determination as to whether or
not the prospective borrower appears to qualify for the Section
312 program, or whether he/she would be better suited for any
other rehabilitation programs, such as CDBG funded Rehabilitation
Deferred Loans, and MHFA loans or grants. This preliminary
screening must be done prior. to the submission of any application
to the Processing Agency. Initial screening is essential for the
cost-effective administration of the Section 312 program; helping
to minimize Richfield HRA staff time and processing agency fees
associated with ineligible applicants or projects.
An initial determination of program eligibility fora particular
Section 312 Loan is based on the following criteria:.
1. Determining Eligible Properties:
a. The property must have one code related deficiency
Section 312 Loans may. only be made for otherwise
eligible properties that have one or more code related
deficiencies (See Section VIII Rehabilitation
Standards, for definition of code related deficiency).
If the property does have one or more such
deficienciesr other work can also be done on
the property if the items are eligible in accordance
with Section V.
b. The property
dwelling
c. Manufactured
are eligible
requirements
4-3,a (3) of
must be an owner-occupied single family
homes and modular (double width) homes
for Section 312 loans if they meet
as identified in Chapter 4 paragraph
the HUD 312 Handbook.
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2. Determining Eligible Borrowers:
An eligible borrower must be an owner-occupant whose principal.
residence is, or will be immediately following completion of
work, the dwelling .unit which is the property subject to the
loan, For applicants purchasing property on a contract for deed,
the fee owners consent must be obtained prior to qualifying with
the Processing Agency.
3. Determining Gost of Eligible Improvements:
The Loan Administrator will perform a preliminary inspection of
the property to assess eligible improvements as defined in
Section V, and the approximate cost of these improvements. This
preliminary inspection will aid in determining if the property.
has sufficient code related deficiencies to conform with the
minimum loan amount requirement. Section 312 Loans may only be
made to properties where the total cost of improvements is
$1D,000 or more. At a minimum, the total cost of code related
improvements must be $6,000.
4. Determining if Section .312 program Income_Requirements Are
Met: -- - -
A borrower must have a gross family income at or below 8.096 of .the
area median income as ,determined by HUD. Gross annual income is
defined to include:
a. The earnings of the prospective borrower(s), and of his or
her spouse living. in the same dwelling unit, and. of all
adults who have an ownership interest in the property and
will co-.sign the Section.312-promissory note. -
b: Other funds regularly contributed or paid by a person not
having an ownership interest in the-property to borrower(s).
This includes .funds regularly paid or contributed by other.
family. members not livingin:the same dwelling unit or by
other adults who live in the dwelling unit. These
contributions or payments must be verifiable, stable and
likely to continue if they are to be included as income
under this section. (See paragraph 5-5 of the HUD 312
Handbook for additional information about verifying income,
and paragraph 7-5-a (2) of the HUD 312 Handbook
for requirement s.. on determining whether the
income, payment, or contributions may be considered.
stableandlikely to continue).
c. Income from alimony, child support., separation maintenance
payments or public assistance which is_likely to be
consistently received by the borrower(s).. Lncome from these
sources must be included as family income when determining
if the borrower qualifies for a 39K loan in accordance with
paragraph 2-3-a of the HUD 312 Handbook. (See paragraph 7-5-
a-(2) of the Handbook for requirements on determining
r:
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whether the income, payments or contributions may be
considered stable and likely to continued.)
d. Cash flow from real estate, other than the property to be
rehabilitated.
5. Determining Ability to Repay Section 312 Loan:
A borrower must have sufficient income to be able to repay a
Section 312 Loan. The final step in the initial screening
process involves making an initial calculation of how much money
the prospective borrower can afford to borrow for rehabilitation.
In order to make this determination two standard. underwriting
ratios are used. The first ratio compares monthly housing
expense, including the estimated cost of the rehabilitation loan,
to gross monthly income. The second ratio compares the monthly
cost of all long term debt, including all housing debt, to gross
monthly income. It is important to note that, at this stage in
the screening process, only an initial determination is made of
the prospective borrower's ability to repay a rehabilitation
loan, which is based on unverified data supplied by the
applicant. The Loan Administrator may obtain a credit report on
the borrower to assist in the initial screening. Formal
verification and underwriting for preliminary approval will be
performed by the Processing Agency.
a. Section 312 Underwriting Standards
(1) Total monthly housing expenses must not exceed
twenty-eight percent (28~) of gross monthly income; and.
(2) The monthly cost of all long term debt must not exceed
thirty-six percent (36~) of gross monthly income.
b. Monthly Housing Expense
Monthly housing expense includes the following and does not
include utility and maintenance costs:
(1) monthly principal and interest payments and mortgage
insurance preiums when applicable, for all current and
proposed debt secured by the property, including debt
on the Section 312 Loan; and
(2) monthly payments for real estate taxes and hazard
insurance.
Items not included: (a) Maintenance costs
(b) Utility Payments
c. Long Term Debt Long term debt includes the following:
(1) Monthly housing expenses as described above;
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(2) payments on installment loan or revolving charge
account debts with more than l0 remaining payments; and.
(3) alimony, child support or maintenance payments.
6. Using the Initial Deteaminat~on of Affordability:
At this point the Loan Administrator needs to determine whether
the ..prospective borrower appears to qualify for the Section 312
program. If the prospective borrower does not appear to be able
to afford any additional debt, or'if the amount of money the
applicant could-afford to borrow appears significantly less than
the applicant's estimated cost of rehabilitation, the prospective
.borrower must be rejected for Section 312 funds and where
appropriate, referred to other rehabilitation programs available
in Richfield.
If the initial-analysis of affordability indicates that the
amount of the rehabilitation loan the prospective borrower can
afford to borrow matches the cost of the improvements identified,
applicants will qualify for further processing according to the
selection criteria identified in paragraph 7 of this Section.
Selected applicants will be referred by the Loan Administrator to
the Processing Agency to initiate the preliminary loan approval
process.
7. Application Selection Criteria:
An application deadline will be established by the Richfield HRA •
for each program phase during a funding year. All applications
for Section 312 loans received prior to this deadline will
undergo initial screening by the Richfield HRA to assess
eligibility.
a. Priority Ranking: :Applicants who appear to meet eligibility
requirements will be given priority ranking if they:
(1) have been notified in writing by the city of any
housing maintenance code violation.
(2) have purchased the property to be improved
..from the Veterans Administration (VA) or
Federal Housing Administration (FHA) within
the preceding twelve (12) months as a result of
a foreclosure proceeding.
In the event the number of applicants who receive a priority..
ranking exceeds the number of Section 312 loans which can be
.processed, a determination which is solely made by the Loans
Administrator based on available CDBG funding. Applicants will.
be selected by lottery as described in sub paragraph c which
follows.
n
U
-2D-
In applying the selection process, the Richfield HRA must adhere
to the following guidelines:
(1) The lottery will be conducted in the presence of a
representative of the Richfield City Clerk as an
independent representative..
(2) No discriminating process shall be employeed which
may prevent program participation.
(3) Where no funds are available for assistance
to applicants who appear eligible, the following
procedure shall be used:
(a) Explain to the applicant that the funding
for the current program phase has been
either depleted, committed, or allocated.
(b) Make the applicant aware of other
possibilities which include the MHFA
Home Loan Program and other state and
federal programs.
(c) Send the homeowner a letter indicating
that the application has been placed
on a waiting list to compete for future
funding, if available. This letter should
also outline other possible avenues of
obtaining home improvement funds.
b. First Come-First Served Selection Process:
If sufficient funds are available to assist all eligible
applicants, the Richfield HRA will implement a first come, first
served basis for application processing. It is imperative that
each application be dated immediately upon receipt. The date of
receipt shall be used as a criteria for recording priority
ranking of applicants.
c. Lottery Selection:
In the event that the number of eligible applicants exceeds the
number of 312 Loans that can be awarded, eligible applicants will
be selected by lottery to utilize all available funds. In a
lottery selection, the first come, first served ranking process
will have no bearing.
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VII. Preliminary Approval:
A. Responsibility Of Processing Agency
After initial screening is completed by the Richfield HRA,
prospective borrowers will be referred to the Processing Agency
to schedule a meeting with the Processing Agency Loan Officer and
begin the preliminary approval process. The Processing Agency
must obtain and verify the following:
-credit history
-mortgage and loan status
-income
liquid assets
-employment. stability
-.title
-property appraisal
-Based on these verifications the Processing Agency will be
responsible for determining preliminary approval in accordance..
...with the guidelines set forth in Chapter 5 of the HUD 312
Handbook.
B. Notification Of Preliminary Approval
L_J
The Processing Agency will notify the Richfield HRA of an
application preliminary approval or denial.. If the applicant is
determined to be ineligible, the Richfield HRA must notify the
applicant of that denial, in writing, within five (5) business
days of the denial .and indicating-the reason for denial as
specified in Section VI, paragraph 7a of these procedural
guidelines. If an applicant is granted preliminary approval, the
Richfield HRA .must notify the applicant of that approval in
:writing within five (5) business days of the approval. Such
notification will include general information pertaining to the
preliminary approval process with the processing agency.
VIII. Dealing With Pre-Construction and Contract Issues
A. Introduction:
The next step in processing a Section 312 Rehabilitation Loan
deals with the construction and contract issues that arise prior
to loan. settlement and actual construction. It includes material
on finding good contractors, Rehabilitation Standards and
rehabilitation specifications, property inspection.. and preparing
an inspection report and a work write-up, securing `contractors'
bids or proposals, developing contract documents, and dealing
with prospective borrowers who want to act as their own
contractor.
The pre-construction review procedures described in this Chapter
are designed to meet the following objectives:
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-To ensure that all deficiencies of Rehabilitation Standards
are corrected in properties being rehabilitated with Section
312 Loan funds, and that the rehabilitation meets all other
Federal requirements, including handicapped accessibility
requirements, historic preservation and environmental
standards, cost effective energy conservation standards, and
lead-based paint hazard requirements;
-To ensure that the proposed work is of a sufficiently high
standard and that, after the completion of rehabilitation,
the property will be in good and readily maintainable
condition, at least for the term of the Section 312 Loan;
-To ensure that the proposed rehabilitation costs are fair
and reasonable;
-To ensure that contractors are qualified to do the required
work, and that qualified small, minority and women's
businesses are afforded the opportunity and encouraged to
participate in the Section 312 program.
It is important to note two additional points. First, the.
requirements of this Section apply to all projects that are
funded totally or partially with Section 312 Loans. For Section
312 projects that are funded with other public or private sector
sources, the Section 312 program pre-construction and contract
requirements apply to the entire rehabilitation project.
Second,. it must always be kept in mind that the contract for
rehabilitation work between the borrower and a contractor is a
private contract for the rehabilitation of a borrower's private
property. Although the source of funding for the rehabilitation
is (in whole or part) a Federal loan, HUD is not a party to the.
construction contract, and HUD accepts no legal responsibility to
the borrower for the quality of the rehabilitation work performed
by the contractor. While HUD imposes a number of terms and
conditions on Section 312 Loans, both to meet specific
requirements and for the Government's protections as lender, it
is primarily the borrower's legal responsibility to see that they
are met. Although HUD mandates that the localities undertake
certain functions in the processing, settlement and disbursement
of Section 312 Loans, and for related construction management,
HUD. does so for the financial benefit of the Government, and in
furtherance of national program objectives, and not for the
direct benefit of the individual borrower. HUD also accepts no
legal responsibility to the borrower to supervise the Richfield
HRA's performance of these functions, and HUD regards the
Richfield HRA as an independent contractor, rather than as HUD's
agent, in performing these functions. (This does not mean that
HUD forgoes the right to take programmatic, corrective or
.remedial action against the Richfield HRA if program requirements
are violated). HUD's legal duty to the borrower in connection
with a Section 312 Loan is limited to the disbursement of funds
to the rehabilitation escrow account for the loan, and to take
-23-
any other actions necessary to compay with HUD's duties under the
legal documents governing the loan.
8. Identifying Qualified Contractorsz
This Paragraph sets forth minimum qualifications for contractors.
The borrower may impose additional qualifications. However,
qualifications imposed by the borrower must not unreasonably.
narrow the range of bidders or violate applicable Federal anti-
discriminatory laws,-executive orders or regulations. (.See
Chapter 12 of the HUD 312 Handbook for additional information on
these Federal requirements).
(1) Eligibility Requirements. For Contractors. A11
contractors participating in the program, except for
thos8.meeting the requirements of Paragraph G
concerning borrowers who act as their own contractor,.
must meet the following qualifications:
(a) Reebgnized General Contractor. The contractor must
be in business as a general contractor with a
recognized performance record, unless the proposed
rehabilitation work doesnotrequire more than
two trades. In addition, :the. contractor must be
legally able to enter into a contract with the
borrower to undertake rehabilitation work.
(b) Licensing.. -The general contract and all •
subcontractors must have all the necessary licenses
required to work in the City of Richfield.
(c) Insurance Requirements. The contractor must.
have, prior to the commencement of work, adequate
worker's compensation, public liability ..insurance
and property damage. insurance.
(d) Not Temporarily or Permanently Suspended. The
.contractor must not be on HUD's debarred list or be'
temporarily or permanently suspendedor-debarred.
by the Richfield'HRA because of poor past
performance. (See Paragraph 2 for additional
requirements concerning Richfield HRA debarring).
The contractor. must also not be on the U. S. General
Services. Administration's Consolidated List of
Debarred, Suspended or Ineligible Contractors.
(e) Encouraging Participation by Small, Local-
Contractors and .Minority and Women-Owned Businesses.
The Richfield HRA must encourage small, .local
contractors and socially and economically
disadvantaged contractors, including contracting
firms owned by women or minorities, to participate
in the Section 312 Rehabilitation Loan Program. For
-24-
,F
~,
this purpose, HUD is adopting the requirements of
OMB Circular A-102, Attachment 0, Paragraphs 9(a)
and (b), which require that Federal grant recipients
take affirmative steps to assure that small,
minority and women's business enterprises are
utilized, when possible, as sources of supplies,
equipment, construction and services, and. which
encourages agencies to apply these standards to loan
programs to the extent practical. -(See Paragraph
12-7 of the HUD 312 Handbook for additional
information).
The Richfield HRA will also refer minority and
women-owned businesses to the Small Business
Administration (SBA) and to local Minority
Enterprise Sma11 Business Investment Corporations
(MESBIC's). (MESBIC's are local, non-profit
minority associations- funded by the U. S. Department
of Commerce to provide seed money to new and
expanding minority businesses).
The Richfield HRA will not maintain or provide to borrowers a
list of contractors meeting the program qualifications. The
borrower will be responsible for investigating contractors and
obtaining bids based on the scope of improvements supplied by the.
Loan Administrator.
2. Richfield HRA Disbarment. The Richfield HRA will monitor the
work of contractors who perform under the Section 312
program. If unacceptable construction practices are
identified, the contractor will receive, in writing, a
warning notice and be placed on probation. The contractor
may continue participating in the Section 312 Loan program,
however, in the event of additional infraction(s) that is/are
.substantiated as servere violations, the contractor will
receive written notice of immediate and indefinite disbarment
from participating in the Section 312 program or any other
rehabilitation program administered by the Richfield HRA.
This determination is made solely by the Loan Administrator.
C. Rehabilitation Standard. The Richfield Building, Housing and
Construction Regulations, Section 400.01 - 410.13 of the
Richfield City Code, will serve as the base for Section 312
program rehabilitation standards. In addition, the following
will be included in the Rehabilitation Standard:
1. Cost Effective Energy Standards. All rehabilitation work
on properties financed with a Section 312 Loan must meet
the minimum requirements of the Cost Effective Energy
Standards, established under 24 CFRIPart 39.
2. Accessory Buildings. Accessory buildings are defined
to include garages, storage sheds, fences, retaining
walls. Accessory buildings must meet the minimum
-25-
\ requirements of the Richfield Zoning Ordinance Section
515.11-515.15 and 540.07.
3. Site Maintenance. The.propert must be clear of all
Y
garage., refuse, trash and debris which is unsightly, or
may constitute a public nuisance or effect the health and
safety of the.. property. The cost of correction must be
included in the Section 312 loan if other resources are
not used.-
4. Flood Proofing Improvements. I'f a property has. in
the past, received storm water flood damage,-flood
proofing improvements must take priority to minimize the
potential for future flooding. If insufficient
funds`-are available to correct-thee .flooding
problem as well as all other identified code related
improvements or if the flooding .problem is not
correctable, a Section 312 Loan cannot be. approved for
that property..
5.- Incipient Deficiencies as described in Section.V B, will
be identified by the inspector in his report. If it is
determined by the inspector that such incipient
deficiencies, if not corrected, will negatively affect..
other code related improvements, correction of the
incipient deficiency must be included in the loan.
a. Rehabilitation Specifications and Performance Standards.
1. Specifications. The.Richfield HRA will use as its
specification manual the Hennepin County Rehabilitation
Specifications.Guide. The Specification Manual will be
made available to contractors working with the Richfield
HRA on Section 312 Loans..
2. Performance Standards. The contractors will be required,
as part of the Rehabilitation Contract, to
perform all
.
work in conformance with all applicable codes,
ordinances,FHA Standards, technical specifications,
and manufacturer's specifications. Upon completion,
all.work must meet the satisfaction. of the Richfield
Building Official, the Loan Administrator and the
homeowner.
Upon completion, all properties-improved with 312 loan funds must
meet or exceed Section $ Housing Quality Standards.
D. `Inspecting The .Property--Mlork Mrite-Ups:
This Section deals with the minimum requirements concerning
inspecting properties on which Section 312 Loans are being
requested and with reporting on deficiencies with a workwrite-
up. To expedite loan processing, the inspection, work write-up
and bidding process may be initiated immediately following. •
initial screening for borrowers who appear eligible.
-26-
(1) Minimum Requirements for all Propert_i_es
After preliminary approval is granted, the Richfield
Building Official must make an inspection of the property
to identify all deficiencies which must be corrected to
meet Rehabilitation Standards and other Federal and State
requirements, including handicapped and accessibility
requirements, historic preservation and environmental
standards, and lead-based paint hazard requirements.
In connection with this inspection or separately, the
Inspector must also make an initial check of the
property to determine if there appears to be any termite
infestation or damage. (See Paragraph 3-1-b-(4)-(e)
of the HUD 312 Handbook for additional requirements
concerning termite inspections, and Chapter 12 for
additional information about the other Federal
requirements). The Loan Administrator will ensure
that the proposed rehabilitation costs are fair and
reasonable in order to protect the Federal government's
interests in the property, in accordance with the
requirements of Paragraph 6-5 of the HUD 312 Handbook.
(2) Reporting on Deficiencies. Both of the following
techniques must be utilized to report deficiencies of
the property.
a. Inspection Report.
The Richfield Building Official(s) will prepare a report
noting all required items, as well as recommended
General Property Improvements and other. recommended
actions. The inspection report will not include
proposed solutions to the deficiencies. However, the
Loan Administrator will ensure that proposed solutions
to deficiencies are included in the work write-up. This
report will be forwarded to the Loan Administrator.
b. Work Write-Ups. A work write-up will be prepared by
the Loan Administrator to meet the following
standards:
1. The work write-up must be either a written
description of each work item to be performed
under the rehabilitation contract, or
architectural plans with written specifications
as needed. The write-up must reference the
specifications and performance standards..
2. It must include all the work necessary to correct
deficiencies of Rehabilitation Standards and to
meet other Federal requirements, as well as any
other work being done to undertake general
property improvements, (General Property
Improvements are permitted only if all
deficiencies of Rehabilitation Standards and
-27-
other. Federal requirements are met. (See Chapter
3 of the HUD 312 Handbookfor additional
information. on General Property Improvements). •
3. It must. include all work to be done on the
property as part of the rehabilitation project,
whether .financed with Section 312 funds or
supplementary. funding.
4. It must be precise and detailed. enough to remove
all reasonable doubt as to tfie location, nature,
method and extent of work to be performed, and to
permit the Loan Administrator-and contractors to
estimate costs .fore each .work item.
E. Bid and Proposal
Cost Estimates. Cost estimates or bids will be prepared by
contractors who have received a work write-up prepared by the
Richfield HRA and who have an-interest in working with the
'Section 312. Loan program. A minimum of two contractor bids
will be required. Participating contractors must submit an
itemized cost estimate along .with his or her proposal; and
the Loan Administrator must review the contractors' cost
estimates and determine..that they are within established
standards.
The cost of a: professional, outside, cost estimating service.
may be inc uded in a Section 312 Loan if such a need arises..
Bidding Requirements.
(a) General Bidding Requirements. The. Richfield HRA must
encourage competition among contractors working on the
Section 312 Program to help ensure that rehabilitation
costs are fair and reasonable, and .that the proposed work
is of a sufficiently high standard. It is also important
to note.. that, the borrower has ultimate responsibility
for the final selection of a contractor.. As a result,
while the Richfield HRA must. be available to provide
technical assistance to borrowers, the borrower has the
right and responsibility to choose .the. contractor of his
or her choose, so long. as the other requirements of the
Section 312 Program are met.
(b) Bid Procedure. Prospective borrow`erswill be required
to obtain proposals or bids from more than one
contractor. Procedures for bidding must include the
following:
1. Work Write-Ups. Bidders must pick-up a work write-up
prepared. by the Richfield HRA, at the Richfield
Community Development Office located in City. Hall.
The contractors wll'also receive a Specification
Book from which they must prepare their bid.
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2. Two Bids. Every attempt must be made to obtain at
lease two bids. Contractors will be allowed a
minimum of 15 business days from the date the bid
package is picked up to submit a written bid. The
bid deadline may be extended if only one. bid is
received in order to allow bidders more time to
submit bids, so long as the contractor who submitted
the one bid is so informed and has the right to'
submit an adjusted bid before the new deadline. If
at least two bids are still not received, the single
bid, if acceptable to both the Richfield HRA and the
prospective borrower, may be accepted and properly
documented in the file.
3. Review Bids With Prospective Borrower. The Loan
Administrator must show prospective borrowers the
total cost submitted by each bidder, and the Loan
Administrator should assist the prospective borrower
to decide which bid to accept. A Compilation of Bids
Guide form can help the Loan Administrator summarize
bids received.
4. Low. Bid. It is recommended that the low bid be
accepted, unless the Loan Administrator and the
prospective borrower decide that the low bidder is
not likely to be able to adequately complete the
improvements for the bid price, or if the low bidder
is otherwise not eligible to participate in the
Section 312 Program. (See Section VII of these
procedural guidelines for additional information on
eligible contractors).
F. Construction Contract:
The rehabilitation contract protects the rights of the borrower,
contractor, Richfield HRA, and HUD, and details the
responsibilities of each. It also defines the procedures for
resolving any disputes that may arise. It must also contain
certain Federally-mandated provisions and must otherwise be
consistent with state law.
The Richfield HRA must monitor bidding activities to ensure that
there is no opportunity for or appearance of collusive
arrangements between contractors and subcontractors, between the
Richfield HRA and contractors, and between contractors and
borrowers.
The Contract Between the Borrower and the Contractor.
(1) General Requirements. The borrower and the contractor
are the sole parties to the rehabilitation contract. HUD
assumes no liability or responsibility for the
performance of any term of the contract, and the
Richfield HRA also accepts no responsibility for the
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performance of the contract, except for .acting as '
agent for the disbursement of funds after
inspecting:,the work performed under the contract.
(See Paragraph A of this Section for..
additional information on HUD responsibilities). The
Loan Administrator, however, must approve the contract.
Section 312 Rehabilitation contracts must include the
following:
(a) A detailed description of the rehabilitation work
to be performed, including work being financed
-with Section 312 funds as well as from other
sources (The Work Write-Up and .Cost Estimate
Guideform, may be used for this purpose);
(b) The agreed-upon price;
(c) The times within which performance and payment
are required (See Section XI for. details
on when work can begin);
(d) Other provisions necessary to describe the
responsibilities of the borrower and the
contractor, including the contractor's one. year
warranty. (See Section XI paragraph 10 of this
procedural: guide);
(e) All .provisions necessary to comply .with Federal
laws and regulations governing Section 312 •
construction contracts, including Federal labor
standards provisions where required {See Paragraph
12-13 and Exhibit 12-11 of the HUD 312 Handbook).
(f) Procedure for resolving disputes
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IX. Preparation of Bid Package
Following the selection of a contractor, as described in Section
VIII, the Loan Administrator must prepare a bid package. This
package will be forwarded to the Processing Agency for final loan
approval. The complete bid package must contain the following:
1. Bid and Proposal Sheet
This form .will serve as the cover sheet for the bid
package. It .must include the address of the property to
be improved and the name of the property owner. The form
provides a summary of the information contained in the bid
package.. An exterior photo of the property must be
attached to this form. General comment regarding the
property to be improved should be entered next to the
photo.
2. Inspection .Report
The original inspection report completed by the
Richfield Building Official must be included in
the bid package.
3. .Work Write-Up and Instructions to bidder.
A copy of the work write-up prepared by the Loan
Administrator and instructions to bidder must be included
in the bid package. The work write-up shall be
prepared in accordance with Section VIII of these
procedural guides. The instructions to bidders identifies
the conditions, procedures and requirements which the
contractor must adhere to in bidding and working with the
Section 312 Loan.
4. Historical Preservation Review
There are no historical preservation districts or eligible
buildings within Richfield. A statement as such will be
included in the bid package.
5. Bid and Proposal Supplement
The Bid and Proposal Supplement form identifies all
contractors and subcontractor who will perform work
under the Section 312 Loan and the cost of their
service. The Bid and Proposal supplement is to be
completed by the contractor and submitted by the
contractor with his or her bid and proposal.
6. Addendum Forms
An addendum form shall be used to identify and
describe any additional work or alternates not specified
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r
in the Work Write-Up, which the bidding contractor.
feels are necessary or desirable in order to carry out
the rehabilitation work. If the contractors suggested
alternates are accepted, this form must be signed
by the owner(s). and the Loan Administrator and attached to
the work write-up.
7. Accepted Proposal Signed by Contractor
The selected contractor's proposal and cost estimate
must be included in the bid package. This proposal
must bear. thesignature of the contractor anal conform
to`all requirements identified in Section VILI E of these..
procedural guides.
8. Tabulation of Bid Form
This form shall identify for all bids received, the
General Contractor and their subcontractors and the
cost breakdown for their proposed work. As .part of this
form, the. owner(s) will be required to make a "statement
- of selection", indicating the owners choice of a General
Contractor, and a willingness to enter into a work
contract with that contractor for the amount of the base
bid plus. any alternates. This statement must be signed
and dated by the owner(s). In the event that only
one contractor bid was obtained for the .work, or if
the unaccepted contractor provided a lower bid,'
a written-explanation must be included. in the bid"
package.
9. Request For Bid-Forms
A copy of the request for bid form, mailed to contractors
of the. owners choice for tfie purpose of soliciting bids
for rehabilitation work. The form will include:
a. A general program summary
b. A statement indicating that the Richfield HRA is
contacting contractors selected by the borrower on
behalf of the borrower,`if applicable.
c. Information as to the time and location .where
rehabilitation work write-.ups and pecifications can
_be obtained.
d. The location where proposals must be submitted.
e. Deadline for submitting proposals
10. Construction Contract
A blank construction contxact shall be included in the
bid package forwarded to the Processing,ggency. (See
Sectioh VIII F of these procedural guides for additional
information regarding the content of the construction
contract). This contract will be, completed by .the
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•
Processing Agency and executed at closing by the
contractor and owner.
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X. Final Approval
The completed Bid Package must be forwarded to the processing M
Agency for underwriting. The Processing Agency must obtain loan
approval and funding obligation-from HUD for each 312 loan. The
Processing Agency is responsible for performing all tasks
relating to loan underwriting,. loan approval, fund obligation,
loan settlement and post settlement_as set. forth in Chapter 7, 8
and 9 of the HUD 312 Handbook.
The Processing Agency shall notify the Richfield HRA of the final
approval or denial of the 312 Loan. The Richfield HRA shall
provide written notice to the borrower of approval or denial
_ within five (5) business days following such notification to the
Richfield HRA from the Processing Agency. For 312 Loans which
are denied final approval, written notification shall include an
.explanation of the reason(s) for denial and outline any other
possible sources of rehabilitation funding, including other state
and federal programs, .which might provide assistance to the
borrower.
For 312 Loans which receive final approval., written notification
to the borrower shall include a brief, outline of the construction
phase of the loan. T_he selected contractor shall be mailed a
proceed to work order identifying the approved improvements and
contract amount, a copy. of which will accompany notification to
:the borrower. Notification to the contractor shall also include
an outline of the inspection and payment procedures and identify •
a date by which. work must begin.
n
XI. CONSTRUCTION INSPECTIONS, PROGRESS PAYMENTS AND
OTHER ISSUES ARISING DURING CONSTRUCTION
1. INTRODUCTION. This Section details issues that arise during
the actual construction phase, including the commencement of
work, maintaining project files, inspections and progress
payments, final payment, warranties, disputes, and completion
where funds are insufficient.
2. COMMENCEMENT OF MORK
a. .Notice from Processing Agency. The Processing Agency
will notify the Richfield HRA of all-loan approvals. The
Richfield HRA will provide notice to the contractor, as
required by the Construction Contract, by issuance of a
written proceed to work order. A copy of the proceed
order will be issued to the borrower. The Rehabilitation
Construction Contract or the Self-Help Agreement, as
applicable, must be so drafted that no contractor is
authorized to begin work, and materials may not be
delivered. to the property until notice of final
approval has been received by the Richfield HRA and a
proceed to work order issued to the contractor.
b. Starting Work. The borrower should cause work to begin
normally within thirty days after the Richfield HRA gives
the borrower notice to begin work. When the work does
begin, the borrower should. notify. the Richfield HRA for
its records. If the Richfield HRA has received no
notification by 30 days, it must follow up with the
borrower to determine the status of the work.
c. Re wired Action if Work Fails to Commence Within Sixt
60 Da s•or If The Contractor Ceases Work for More
Than 30 Days. Work must begin within sixty 60 days
after the Richfield HRA gives the borrower and any
contractor notice under Paragraph a., above, unless the
following exception is granted: The Director of
Community Planning and Development in the-HUD Field
Office may grant an extension for up to sixty (60)
additional days for circumstances beyond the control of
the borrower.
If work has not begun by sixty (60) days after the notice
from the Richfield HRA to the borrower and any contractor
under Paragraph a. above, or within the time limits
detailed in an extension approved in accordance with the
requirements in the previous sentence, the Richfield HRA
and Processing Agency must take immediate steps to
terminate the loan in accordance with the Rehabilitation
Loan Agreement between HUD and the borrower.
In addition, if the contractor ceases work for
more than 30 days, unless extended by the HUD Field
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Office .Director of Community Planning and Development,
the HRA and Processing Agency must take immediate steps
to terminate the loan in accordance with the
Rehabilitation Loan. Agreement between HUD and the
borrower,
3. REQUIREp DOCUMENTATION ON WORK PROGRESS.. The. Processing
Agency must maintain a case history in each loan file. The`
Richfield HRA must record each inspection, each significant
personal or telephone contact with the borrower and contractor,
and each significant action by the Richfield HRA. with .regard to
the case. Copies of all correspondence, documents and memoranda
relative to the case must be forwarded to-the Processing Agency
and attached in the loan folder as part of the permanent case
history.
4. INSPECTIONS REQUIRED PRIOR TO PAYMENT. The Loan
Administrator is"responsible for. obtaining required and other
necessary inspections on all properties.
a. General. Inspections must thoroughly and accurately
take note of the amount, value and quality of work
completed, and verify that completed work. adheres to
the write-up and Richfield HRA. requirements as established
in the Specification Book. These inspections are for the
benefit of HUD as .lender, and for the Richfield HRA fora
the purpose of assuring that Rehabilitation Standards are
met. In addition, the borrower is responsible for
inspecting the property for his or-her own protection. No
payments may be made to a contractor unless the borrower
:agrees that the payment is warranted and signs the
Disbursement Voucher (see Paragraph 6 of this Section for
additional information on progress payments),-except as
required. in Paragraph 11 of this Section.-
b. Timing of Inspections. The Richfield HRA must ensure that
such inspections .are made in a timely manner so as not. to
hold up payments to the contractor which are merited.
Work must be inspected, at a minimum, at the junctures
listed below.
(1) Prior to the issuance of all payments to the
contractor.
(:2) When the borrower asks the Richfield HRA to 'inspect
the work because he ~or she is dissatisfied with the
quality or progress of the contractor's .work,
questions whether 'the .contractor's. performance
is' adequate.., or when the contractor requests an
inspection because he or she believes. that the
.borrower is being. unreasonable in his or her
.demands.
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(3) Prior to the contractor closing-in work, such as
the point at which electrical rough-in work is
complete and the contractor is ready to install
sheetrock wall panels.
5. PROGRESS PAYMENT HOLDBACK. A holdback of ten percent (10~)
of the value of the work completed for each progress payment to
the general contractor is required during construction.
6. PROGRESS PAYMENTS TO CONSTRUCTION CONTRACTORS. Upon request
for a progress payment by a construction contractor., the Loan
Administrator, Richfield Building Official if necessary, and the
borrower (or his/her representative) must inspect the work and
make a determination if it is acceptable and in compliance with
the Rehabilitation Contract. Progress payments to the contractor
may be made only after this inspection and approval take place.
Such authorization must be evidenced by a Disbursement Voucher.
(a) Inspection Procedure
(1) The contractor submits a partial payment request
(i.e., the contractor's invoice) to the borrower
when work is completed in sufficient quantity and
quality, in accordance with the Rehabilitation
Contract, to receive a progress payment.
(2) The contractor must list on the partial payment
request the work items for which payment is
requested. The Richfield HRA may request, as
necessary, a listing of the specific work items and
the contractor's requested payment amount for each.
The Richfield HRA should prohibit payment for
partially completed items except in cases where.
"rough-in" and completion are clear and distinct
phases, such as in electrical and plumbing work.
(3) The contractor must submit a Sworn Construction
Statement with the partial pay request listing all
sub-contractors and/or suppliers contributing to
the work for which the bill is being submitted.
The Statement must be signed by the contractor
holding the Work Contract.
(4) The Richfield Building Official and Loan
Administrator must inspect the work to. determine
whether it is sufficient in quantity and quality
under the terms of the Rehabilitation Contract to
meet the conditions for a draw.
(5) A Disbursement Voucher must be prepared, and
when the borrower is satisfied that a draw is
merited under the contract, he or she must. sign
the Disbursement Voucher.
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r.
{6) If the Richfield Building Official and Loan
Administrator also determines that a draw payment is
warranted, .the Disbursement Voucher must be signed by
the Loan Administrator.
(7) The Loan Administrator and Richfield Building
Official may find that the work warranting a draw
differs from he amounts claimed by the contractor.
In such cases, prowided that the difference is
not significant,. the Loan Administrator may
authorize payment for the lesser amount than
the contractor's invoice, less the required
holdback, based. on actual performance in
relation to the contract. For example, if
the contractor requests a payment for work
.valued at $6,000 and the Loan Administrator
determines that the value of work
satisfactorily completed is $5,500, the Loan
Administrator may authorize payment fore
$5,500, less th8 required holdback, rather than
withhold payment until the. exact amount of .work
specified in the draw schedule is completed. In
no event may an Richfield HRA authorize payment for
work not meeting ..the quantity or quality requirements
of 'the pecifications in the rehabilitation
contract, in the. judgement of the Loan Administrator
or Richfield Inspector and the borrower. (except
as required by an arbitrator (see .Paragraph 11 of
this Section).
(b) N0 PAYMENT MAY BE MADE FOR WORK WHICH DOES NOT
MEET`_THE ABOVE STANDARDS NOR MAY .DISBURSEMENT
VOUCHERS BE AUTHORIZED IN ANTICIPATION OF
SATISFACTORY COMPLETION OE WORK COVERED BY THE
VOUCHER.
(c) Frequency of Progress Payments. Progress payments
can be made up to a maximum of three (3) for each
loan, this is to include the final payment. The
number of progress payments should be kep at a
minimum whenever possible. Requests for partial
.payments in excess of thus limit will be
evaluated by the Loan Administrator-on a case by
case basis. Under no circumstances will the
:number of payments exceed five {5) for each loan.
7. CHANGES IN THE SCOPE OF WORK. No changes may be made in the
work write-up, as incorporated in the Construction Contract,
without an authorized Change Order signed by theborrower and
the contractor and authorized in writing by the Loan
Administrator. Work to be covered by the
Change. Order must note begin until the Change Order has been
signed by both parties 'and by the Loan Administrator to
signify approval. A change order must not delay the start of
~ -38-
construction beyond the requirements .detailed in paragraph 2
of this Section. The Processing Agency must be notified
immediately of any change order to determine if the change
order would extend construction beyond the Amortized
Effective Date (AED). The requirements for extending the AED
described in paragraph 9-2-a-(2) of the HUD 312 Handbook must
be followed and the cost impact on the contract must be
considered and dealt with by the Processing Agency. The
Processing Agency must then notify the HRA of its findings
and recommended course of .action.
(a) Definition of Change Order. A change order must
describe precisely .any modifications to the scope of
work and any changes in the contract price. A
modification might be relatively minor, such as
installing a drop ceiling instead of a sheetrock
ceiling at the same cost, or the change may be major,
for example, rebuilding a masonry wall that was
originally intended to be "pointed up". The change
order must be prepared according to the standards of
an acceptable work write-up (see Section XIII). It
must include the contractor's cost for the new work,
and for the deleted work, if any. These cost changes
must be verified as reasonable by the Loan.
Administrator.
(b) Covering Additional Cost for Changes, if Any. The
cost of changes in the scope of work can be covered
by deleting work that is not required (i.e., general
property improvements .(GPI's) or work to correct
incipient violations), by using the contingency
reserve, by having the borrower provide additional
funds, or by having the contractor absorb the costs.
These options are described below.
(1) Deletions of Work Included in Original Write-Up.
GPI's and corrections of incipient violations
included in the original work write-up may be
deleted to offset the cost of unanticipated, but
essential new work. If this method is selected,
the Change Order must indicate the value of the
work deleted in comparison to the value of the
work added. The value of work deleted must
equal or exceed the value of work added, or
other funds must be available to make up the
difference in accordance with Paragraphs 2, 3,
and 4 below. Work to correct deficiencies to
meet rehabilitation standards or to comply with
other Federal requirements may not be deleted to
offset the cost of the new work. However, such
work may be modified, if a less costly but
acceptable method of completing it is available,
to free funds to pay for new work.
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~~
(2) Use of Contingency Reserve. The contingency
reserve, if any, may be used to pay for
additional work. included in a Change Order. .
(3) Borrower Provides Additional Funds.. If .the
borrower must provide or secure additional .funds
to cover the .work included in the change order,
such work must not begin until the funds have
been deposited in a separate escrow account with
the Processing Agency. These funds must be used
in accordance with the requirements governing
supplemental financing in Paragraphs 7-5-(d)-3
and 9-3-1 of the HUD 312 Handbook.
(4) Contractor Absorbs Additional Cost.
Rehabilitation construction work has many
unknowns, and contractors build into. their. price
a reserve. to cover minor unforeseen work items.
In such cases the contractor might be expected to
absorb the extra cost. This .option should be
employed with discretion, to cover minor changes
only, where the contractor mayreasonablybe
expected to absorb the cost. The Richfield HRA
should discourage the borrower from pushing the
contractor to absorb. an unreasonable amount of
unanticipated or extra. items, since this could
give the .contractor grounds to abandon the job,
and could lead to the need for an extension of •
.the AED (Amortized Effective Date), or even a
default on the loan.
(c) See Paragraph 11-9 of the HUD 312 Handbook for
requirements concerning cost overruns where additional
funds cannot be obtained by one of the methods described
above.
8. FINAL PAYMENT. The final payment, including the holdback
..amount., may be made to the"contractor after all of the
following `have occurred;
(a) The Richfield Building Official, Loan.Administrator and
the contractor havesigned a Certification of Final
Inspection and Request for Final Payment indicating that
-the construction work has been satisfactorily completed
in accordance with .the construction contract.
(b) The contractor :has .given the. Loan Administrator all
the original warranties and guarantees.
(c) The contractor has submitted a Sworn Construction
Statement 'listing all sub.-contractors ..and/or
suppliers contributing to work for which the .bill
is being submitted. The Statement must be signed
by the. contractor holding the Work Contract.
-4D-
(d) The Certification of Final Inspection and Request
for Final Payment and the final Disbursement Voucher
have been submitted to the Processing Agency.
(e) All mechanics or materialman's liens have been presented
to the Richfield HRA. Copies of all mechanics lien
waivers will be forwarded to the Processing Agency to be
included in the file as a permanent record. The
original lien waiver will~be forwarded to the borrower.
9. REQUIRED ACTION IF MORK IS INCOMPLETE OR UNSATISFACTORY
The Loan Administrator should promptly notify the
borrower if the Loan Administrator or Building Official
determines, by an inspection of the property,
that work is incomplete or unsatisfactory or otherwise
not in accordance with contract. At that time, the
borrower should be advised to have the contractor
initiate corrective action. PAYMENT MUST NOT BE
AUTHORIZED FOR UNSATISFACTORY ITEMS UNTIL THE
CONTRACTOR HAS SATISFACTORILY COMPLETED THE NECESSARY
CORRECTIVE ACTION. FURTHERMORE, THE BORROWER MUST
NOT BE COERCED IN ANY WAY TO APPROVE WORK WHICH IS
NOT IN ACCORDANCE WITH THE TERMS OF THE CONTRACT.
10. MARRANTIES AND GUARANTEES. The contractor must guarantee
all work, materials and workmanship for a minimum of one year
from the date of final inspection and approval. Where the
contract specifies a warranty period for a particular item of
more than one year, the general contractor must warrant the item
for the period specified, regardless of whether the work was
performed by the general contractor or by a subcontractor. The
general contractor must take responsibility for ensuring that the
warranty is honored. Ail requests for warranty repairs should be
made in writing by tfie borrower to the contractor.
11. COMPLAINTS AND DISPUTES
a. General. The borrower is responsible for resolving any
construction and post-construction complaints with
the contractor. But rehabilitation construction is a
difficult process and minor disagreements are likely to
arise. The Loan Administrator should assist
the borrower and contractor in working together to
resolve any differences that arise.
b. Informal Mediation. When the borrower and contractor
have made good faith efforts to resolve their
differences without success, the Loan Administrator
may be called upon to mediate informally. In such cases,
the Loan Administrator must not assume, as a policy,
that either borrowers or contractors are generally
"right", but must review all of the facts of each case
carefully. Where the Loan administrator is unable to
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12.
13.
,,
assist in the resolution of problems, settlement will
occur by arbitration as described in the next paragraphs.
1. ARBITRATION
.The American Arbitration Association, must be called
upon to settle disputes which could not be resolved
by the borrower, contractor or Loan Administrator.
The Richfield HRA must not function as an arbitrator in
such matters. The ..Richfield HRA must abide by the
--findings of the American Arbitration Association.. The
Richfield HRA must withhold t'he balance of the loan in
accordance with the Rehabilitation Loan Agreement and
.refer the case to the Master Servicer for possible
foreclosure when, in the case of an unresolved dispute
between the contractor and owner,
(a)..the borrower: will not submit the dispute to the
American, Arbitration Association, or .the borrower
will not submit the dispute to litigation, and
(b) the Richfield HRA inspection indicates that the work
in dispute. was done in accordance .with the
Rehabilitation Contract.
(c) The cost of arbitration shall be paid for by the
borrower-or contractor, which ever is found to be at
fault.
If a finding of .the American Arbitration Association
determines that the contractor must be paid, and if the
borrower refuses to give his or her approval, the Loan
Administrator must authorize the disbursement and
process for payment without the borrower's signature,
noting. the reasons for doing so on the Disbursement
Voucher and'in the files.
PROCEDURES IF THE OWNER DECLARES THE CONTRACTOR IN
DEFAULT. In cases of contractor default, when the
Richfield HRA is reasonably certain that 'the borrower has
properly exercised his or her.:legal. rights and
responsibilities under the terms of the Rehabilitation
Contract, the borrower, with assistance of the Richfield
HRA if requested,. must secure the services of a new
contractor to complete the
-work, pursuant to the requirements of Section XIII B. A
new Rehabilitation Contract must be prepared and executed.:
The new contract., and all disbursements thereunder, .must
-meet all requirements of these procedural guides and the
HUD 312 Handbook.
COMPLETION OF JOBS WHERE FUNDS ARE INSUFFICIENt BECAUSE OF
w
HE LIKE.
•
•
•
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In some cases where the contractor defaults or refuses to
honor the warranty, funds remaining in the rehabilitation
escrow account may be insufficient to complete work..
a. Borrower and HRA Responsibilities. In each case of
contractor default, the HRA must carefully assess the
particular situation.. If efforts to resolve the matter
through the American Arbitration Association fail, the
borrower is responsible to provide the funds needed for
corrective action and to take legal action against the
contractor to recover the costs and/or to compel the
contractor to complete the work. .The HRA is not obligated to
take action against the contractor on the borrower's behalf
but it may choose to do so. Additional rehabilitation funds
may be secured from other public or private loan or grant
funds, if eligible, or in accordance with the procedures
detailed in paragraph 11-9 of the HUD 312 Handbook, but the
HRA is not legally obligated to provide such funds.
b. Changing the Amortization Effective Date. The AED may be
extended, but only if the requirements of paragraph 9-2-9-
(2)-(b) of the HUD 312 Handbook are met. However, in these
cases of contractor default, HUD will consider reasonable
extensions of the AED beyond the time limits in such
paragraph if:
(1) truly beyond the control of the borrower,
(2) fully justified by the facts, and
(3) it appears likely that the borrower will be able to
secure a new contractor and have sufficient funds
to complete the project.
14. REFERRAL TO HUD DEBARRED LIST. As noted in Chapter 6 of the
HUD 312 Handbook, HUD maintains a list of contractors who are
debarred, suspended, temporarily denied participation and who are.
voluntarily excluded. The HRA must submit the names of
contractors who have performed unsatisfactorily to the HUD Area
Rehabilitation Management Specialist for possible inclusion on
the list.
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~ ,
.;
XII. .OTHER. PROVISIONS
The Section 31.2 Rehabilitation loan Program must be
administered in compliance with all applicable.Federal statutes
and regulations, as they may be amended from time to time,
including, but. not limited to statutes, regulations and executive
orders pertaining to truth-in-lending, real estate settlement,.
flood, plains and wetlands, freedom of information and privacy,
equal opportunity, environmental review, lead-based paint,
handicapped accessibility, cost effective ene-rgy conservation,
and labor standards and. relocation. The Richfield HRA and
Proses-sing Agehcy;must-adhere to guidelines, as applicable, set
forth in Chapter 12 of the HUD 312 Handbook.,..Each of the
following is summarized in Chapter 12:
-Truth in Lending
-Real Estate .Settlement
-Flood Insurance
-Freedom of In formation and Privacy Acts
-Righ to Financial Privacy -
-Equa Opportunity
-Environmental .Review
-Lead Based Paint
-Asbestos
-Handicapped Accessibility
-Cost Effective Energy Standards
-Labor Standards
-Relocation/Displacement
-Conflict of Interest
-Special Consideration Applicable To Section 312 Loans With
Urban.Komesteaders
•
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U
-44-
-ram- r
CITY OF RICHFIELD, MINNESOTA
HRA LETTER N0. 28
August 29, 1988
Issue Statement:
Adoption of a resolution establishing the PASSS Advisory
Committee.
Background:
At the June 20, 1988 meeting, the HRA authorized the initiation
of a planning study for the Penn Avenue and Sixty-Sixth Street
area (PASSS). It was indicated during the discussion that an
advisory committee would be established to work with staff during
the planning process. The committee would provide input to
plans, proposals and concepts which emerge from the planning
process. The resolution which the HRA is being asked to adopt,
was initially presented for review as part of that discussion.
This letter contains information relative to the establishment of
the committee.
Members were solicited for the committee by mail. Approximately
750 letters were mailed to commercial property owners and tenants
within the proposed study area, and residents within an area
bounded by Russell and Newton Avenues and 62nd and 70th Streets.
(Exhibit A, attached).
Some 40 to 50 people contacted us or were suggested for the
committee. In order to categorize applicants and ensure that all
areas were represented while, at the same time, keeping the
committee size reasonable, an application process was utilized.
(Exhibit B, attached). A committee of 28 is recommended: 18 from
within the study area, six immediately adjacent and four,
including the chairperson, at large from the City. (A list of
the nominees is attached to the resolution as Attachment A).
Where several adjoining neighbors applied from a given block or
area, the neighbor closest to the study area was selected.
Commercial property owners outside the study area were not
included. Families where both husband and wife applied or both
partners in a business applied, only one was nominated.
To provide experienced leadership for this planning process, it
is recommended that Ms. Connie Murray be designated as
chairperson based on her experience with the Planning Commission
and other city-wide activities. There is also a need to
communicate with and receive input from groups involved in policy
formulation and implementation. Therefore, it is proposed that
the School District, HRA and City Council select an individual
who would function as a liaison to the advisory committee.
Finally, to facilitate the smooth operation of the committee and
to maximize the amount of time available for planning,
procedural rules are needed. These rules are included within the
resolution. (The resolution is attached as Exhibit C).
~` /-~
Recom®endation:
Adopt the attached resolution which establishes the advisory
committee, designates members, appoints the chairperson and
establishes some operating rules.
Basis of Recommendation:
It is customary to have a citizens committee for staff to work
with during the planning process.
Alternative Rec®mmendation:
1. Not establish a committee.
2. Modify the proposed operating rules.
3. Modify the proposed committee membership.
Decision/Decision Mlode:
The planning study has been initiated and it would be appropriate
to establish a committee now so that a meeting could be scheduled
for September.
Respectfully submitted
mes D. Prosser
ty Manager
JDP:sae
EXHIBIT A
City of Richfield • 6700 Portland Avenue • Minnesota 55423
City Manager Msyor
James D. Prosser Steve Quem
July 21, 1988
Council
Edwina Garcia Ivan Ludeman
Martin Kirsch Michael Sandahl
Dear Business Person, Resident, Property Owner:
~~
The Richfield Housing and Redevelopment Authority (HRA) is
responsible for establishing programs directed at renewing the
physical environment of the city, broadening the tax base,
increasing employment opportunities and providing affordable
housing.
Renewing the physical environment is a high priority. During the
last few years, improvement of commercial areas has received
considerable attention. Recently, the HRA instructed staff to
undertake a planning study of the commercial area in the vicinity
of Penn Avenue. and Sixty-Sixth Street (see map on back of this
letter). The boundary on the map is intended to identify
generally the area to be studied. During the planning process,
the boundary may be adjusted to better meet the area's needs..
The study which will require about ten months to complete will
result in a plan for improving the area.
The HRA would like to include within the planning process
participation by business people anal residents. Persons owning
property or businesses within an area bounded by Highway No. 62,
Newton Avenue, .70th Street and .Russell Avenue are being invited
to participate. If you would be interested in serving on a
committee involved in the planning, please contact Bruce Palmborg
at City Hall, (.869-7521, Ext. 531) between the hours of 8:00 a.m.
and 4:30 p.m. by Wednesday, August 3, 1988. An application for
membership on the committee will then be made available to you.
Completed applications are due Monday, August 8, 1988. Questions
which you may have can also be discussed when you call. The
committee will have. up to twenty members.
Q~~,~
~'llace
ommunity Development Department
BJW:dkh
Telephone 869-7521 (612)
M Equal Opportunity Employer
Thank you.
PENN AVENUE 81XTY-SIXTH 8TREET BTUDY AREA
H~~--{{ ~~----{{ (PA888)
CO. MST. N0. 62
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DATE:
HRA PASSS ADVISORY COMMITTEE APPLICATION FORM
The Richfield Housing and Redevelopment Authority (HRA) is
seeking residents, business owners and property owners to serve
on a committee and work with city staff in preparing a long range
improvement plan for the PASSS area (see map on reverse side of
this page).. The majority of members will be people with
residential or business interests in the study area or
immediately adjacent to it. It will probably take about 10
months to prepare a plan. There will be a meeting approximately
once every two months to attend as a committee member. There may
be more applicants for the committee than positions to fill. To
assist the HRA in making committee member selections, it would be
helpful if you would provide the following information. Please
complete in black ink or typewriter.
.-
NAME
Last irst M dd e
HOME ADDRESS
If owner of a business indicate the following:
Name of Business
Address
Number of years at this location T years.
If owner of real .estate which is rented/leased indicate the
following:
Address of Rented/Leased Property
Number of years property owned years.
I should be selected as a committee member because (attach no
more than one additional page):
ether civic, professional and community activities in which I
have been involved:
Return to Office of Director of Community Development, 6700
Portland Avenue, Richfield, MN 55423 by August 8,.1988.
PENN AVENUE SIXTY-81XTH STREET 8TUDY AREA
(PA388)
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EXHIBIT C ~~-~
RESOLUTION N0.
THE HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD, MINNESOTA
RESOLUTION ESTABLISHING A
PASSS ADVISORY COMMITTEE
WHEREAS, the Housing and Redevelopment Authority in and for
the City of Richfield (HRA) has found that the formation of a
new land use plan and program for the development and
redevelopment of that area of the city referred to as the "Penn
Avenue and Sixty-Sixth Street Area" is necessary to promote the
public health, safety and general welfare of Richfield's
citizens; and,
WHEREAS, the formation of a plan and program should involve
input from residents and business people; and,
WHEREAS, input is best provided by an organized structure,
hereinafter referred to as the "Committee."
NOW, THEREFORE, BE IT RESOLVED
1. The Committee shall be advisory to the HRA to provide
input to plans, proposals and concepts referred to it by
the HRA and staff.
2. Meetings shall be held at the call of the chairperson or
if not available the vice-chairperson.
3. Robert's Rules of Order shall be utilized in the conduct
of all meetings.
4. A quorum shall be required to conduct business and shall
constitute one member more than fifty percent of the
total voting membership.
5. Recommendations, if any, may be made by the Committee on
the basis of a majority vote.
6. Minutes of the meetings shall be circulated to the
Planning Commission, HRA and City Council.
7. Members are to be diligent in attending meetings.
8. The School District, HRA and City Council may each
appoint a nonvoting liaison member.
9. After April 30, 1989 the Committee shall dissolve unless
prior to that time, the HRA has determined by resolution
that it should continue.
~/
10. Members on the Committee shall be those persons listed
on Attachment A.
11. The Planning Commission Chairperson is appointed
Chairperson and the position of Vice-Chairperson is to
be determined by the Committee.
12. The Department of Community Development shall provide
staff support to the Committee and be in attendance at
all meetings.
13. The Executive Director is directed to take the
appropriate steps to effectuate this resolution.
Adopted by the Housing and Redevelopment Authority in and
for the City of Richfield, Minnesota this 29th day of August,
1988.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
~ ~'
Attachment A
PASSS ADVISORY COMMITTEE
NOMINEES
Chairperson: Connie Murray
Commercial Representatives, within study area
Applicant Associated With
Harry Goodyear Absentee owner of 2321-23 W. 66th St.
a commercial property
29-028-24-41-0012
Leroy Kamarainen Owns One Stop Mail Shop, 2000 W. 66th St.
28-028-24-23-0017
(property owner: Eleanor McKasy,
931 Oak Ridge Avenue, Shoreview, MN
55112)
Lee Berg Owns Kid Stop 2316 W. 66th St., tenant in
shopping center
29-028-24-14-0028
(property owner: E&W Realty Company,
900 Second Street South,
Suite 555, Minneapolis, MN 55402)
Louis Kopnick Owns Penn Avenue Laundry
6726 Penn
29-028-24-41-0145
(property owner: Nokomis
Sheet Metal Works, 6724 Penn Avenue South,
Richfield, MN 55423)
Thomas Warner Absentee owner of office building
6701 Penn Avenue South
28-028-24-32-0080
(property owner: Warner Holding Company,
6701 Penn Avenue South,
Richfield, MN 55423)
Paul Oberstar Owns 6645 Penn, new Car X business
28-028-24-32-0062
Vern Veit Owns several properties and Southtown
Plumbing on Penn,
6636 Penn Avenue South
29-028-24-41-0009
Steve Ryan Owns Fish & Pet Center
6634 Penn, tenant of Veit
29-028-24-41-0008
~/ ~
Stephen Ukes Owns Trendsetters
6631 Penn, tenant of Veit
28-028-24-32-0063
(property owner
Harold L. Fallden, 5925 Drew Avenue South,
Minneapolis, MN 55410)
Roger Karjalahti Owns 6620 Penn and operates State Farm Ins.
office from property
29-028-24-41-0005
Blair Wolfson Absentee Co-owner of shopping center, -
northwest corner 66th & Penn
29-028-24-14-0028
(property owner shown as:
E&W Realty Company d/b/a Penn/66th Center,
900 Second Street South,
Suite 555, Minneapolis, MN 55402)
Henry Kristal Owns Embers Restaurant and co-owner of
shopping center 66th & Penn
29-028-24-14-0027
Judith Nielsen Owner-occupant of 6525 Penn and operates
Video Expressions from this location
28-028-24-22-0022
(property owner: Park National Bank,
5353 Wayzata Boulevard,
St. Louis Park, MN 55416)
Louise Sterner Owner-occupant 6417 Penn and operates
Attracts Signs, Inc. from this location
28-028-24-23-0004
Russell T. Lund Owner-occupant of 6228 Penn, Lunds Inc.
29-028-24-11-0108
John Cookos Absentee owner, property at
6533-35 Queen Avenue South
29-028-24-14-0057
(mailing address: 5332 Morgan Avenue South,
Minneapolis, MN 55419)
~%~
Residential Representatives, within study area
Applicant Associated With
Scott Wagner Resident, owner 6308 Oliver Avenue South
28-028-24-22-0119
Cory Bultema Resident, tenant 6532 Oliver Avenue South
28-028-24-23-0116
(property owner: Dean M. Akins,
P. 0. Box 35383,
Minneapolis, MN 55436)
Residential Representatives, Outside study area
Applicant Associated With
Mary Nelson Resident, owner, 6635 Oliver.
28-028-24-32-0046
Kermit Randall Resident, owner, 6814 Oliver Avenue South
28-028-24-33-0039
Joann Pederson Resident, owner, 6812 Queen Avenue South
29-028-24-44-0021
Lawrence Emond Resident, owner, 6325 Russell Avenue South
29-028-24-11-0063
Jeff Thorson Resident, owner, 6401 Russell Avenue South
29-028-24-14-0035
Paul Dyste Resident, owner, 6732 Oliver Avenue South
28-028-24-32-0071
City Wide Representatives
Applicant Home Address
Wendell Treichel
Rev. John Chell
7060 Oak Grove Blvd.
6734 Oakland Ave.
Tom Ohnesorge 7220 Clinton Ave.
~~
CIT'~ OF RIC~NFIELD, M][NNESOTA
HRA LETTER N0. 27
August 29, 1988
Issue Statement:
Adoption of a resolution authorizing implementation of the
Richfield Section 312 Rehabilitation Loan Program.
Background•
In a March, 1988 memo, the HRA was informed of staff progress
toward the development and implementation of a Section 312
Rehabilitation Loan Financing Program in Richfield. Implementing
this program was first authorized by the HRA as part of the 1988
budget. Through a cooperative effort by HUD, Hennepin County,
the St. Paul HRA and HRD staff, program development has finally
been completed.
The Section 312 Program provides rehabilitation loans of up to
$33,000 for owner-occupied single family properties. For
approximately 25 years HUD has provided loan funds using the
Section 312 program to rehabilitate private property and upgrade
existing neighborhoods. The annual interest rate is 3%. The
Richfield program will be targeted to borrowers with gross annual
incomes at or below 80% of the Twin Cities area median as
determined and adjusted by HUD. The maximum eligible income
presently is:
Family Size Income Limit
1 $22,700
2 25, 900
3 29,150
4 32,400
5 3. , 450
6 36,450
7 38, 500
8 40,500
The Section 312 Program compliments the existing CDBG
Rehabilitation Deferred Loan Program. Section 312 rehabilitation
funds will be available to lower income homeowners with incomes
which exceed the maximum Deferred Loan limit yet who are unable
to secure large sums of home improvement financing from a lender.
The program requires complete rehabilitation of deficient
properties to meet minimum housing standards. In addition to
total compliance, the homeowner can invest up to 40% of the loan
amount in elective improvements. Such improvements may include
room additions, new exterior designs and general remodeling.
This program is unique from the Deferred Loan program which
forces prioritization of improvements with limited funding.
Administration of the Section 312 Loan Program is complex and
staff intensive. Richfield lacks the personnel and program
experience necessary for complete administration of the program.
~,~
However, an agreement for loan processing services has been
drafted by the HRA's legal counsel. This agreement secures
services from an experienced Section 312 administrator, the St.
Paul HRA. The St. Paul HRA has successfully operated the Section
312 Program for 19 years.
Within the terms of the agreement, the Richfield HRA will be
responsible for:
1. Marketing the program.
2. Initial screening of applicants.
3. Inspection of dwellings.
4. Preparation of "Scopes of Work" for contractor bidding.
5. Assistance to homeowners in securing bids.
6. Final inspections.
The St. Paul HRA will be responsible for:
1. All loan origination and qualifying procedures.
2. Preparation of loan package for HUD approval.
3. All loan closing procedures.
4. Issuance of payments to contractors.
5. Arranging for the servicing of loans with a HUD
identified contractor.
6. Final loan closeout.
The cost of loan processing services provided by the St. Paul HRA
is $1,500 for each completed loan. In the event a loan is not
processed through closeout, the fee for service will be based on
an hourly rate not to exceed particular maximum amounts for
various processing stages. All processing fees to the St. Paul
HRA will be funded with a special set aside of CDBG Year XIII and
XIV funds. The agreement is in effect through June, 1990.
In addition, a $500 CDBG funded "incentive grant", provided by
the HRA, will accompany each approved Section 312 loan. HUD
requires this targeting of CDBG funds to each property
specifically for code related improvements.
Funding for Section 312 loan processing and incentive grants has
been approved as part of the 1988 revised budget. An allocation
of $16,000 in CDBG funds is anticipated to facilitate
approximately seven (7) Section 312 loans and access
approximately $100,000 in HUD Section 312 funds.
A Procedural Guide has been developed by HRD staff to further
define program requirements and the administrative
responsibilities of the Richfield HRA and St. Paul HRA. These
procedures have been reviewed and accepted by HUD, Hennepin
County and the St. Paul HRA. A copy of the Procedural Guide
accompanies this letter.
_~
Recommendation:
Authorize the implementation of the Richfield Section 312
Rehabilitation Loan Program.
Basis for Recommendation:
1. HUD Section 312 funds are available to finance major
home improvements for low and moderate income households
at a reduced interest rate.
2. HRD has developed a means to access these funds without
increasing staffing.
3. The rehabilitation funds will serve a segment of Richfield
homeowners who have experienced difficulty securing home
improvement financing from other sources.
4. A revenue source has been identified for program
administration.
5. Approximately 30 Richfield households responded to a
test marketing of the Section 312 program, suggesting
strong interest.
6. HUD, Hennepin County and the St. Paul HRA have reviewed
and accepted the Richfield Section 312 Program Procedural
Guide.
7. The St. Paul HRA authorized the loan processing
agreement on August 17, 1988.
Alternative Recommendation:
To not authorize the implementation of the Section 312
Rehabilitation Loan Program in Richfield. This would prevent
efforts to expand rehabilitation opportunities for low and
moderate income Richfield homeowners. In addition, the HRA would
not benefit from the considerable amount of staff work that has
been invested in program development.
Decision/Discussion Mode:
Authorization by the HRA will allow program activity to begin
immediately.
Respectfully submitted,
es D. Prosser
ty Manager
JDP:sae
~~`
HRA RESOLUTION N0.
AUTHORIZING THE IMPLEMENTATION OF
THE RICHFIELD SECTION 312 REHABILITATION LOAN
PROGRAM
WHEREAS, the Richfield HRA is authorized by Minnesota
Statutes Section 469.012, Subd. 12 to make and carry out a
program of voluntary repair and rehabilitation of residential
structures; and
WHEREAS, the U. S. Department of Housing and Urban
Development (HUD) has available Section 312 funds to finance home
improvements for low and moderate income households at a reduced
interest rate; and
WHEREAS, the Richfield HRA has means of accessing these
funds; and
WHEREAS, the Richfield HRA lacks personnel and experience
to efficiently administer the program; and
WHEREAS, the St. Paul HRA has been identified as a
processing agent to assist in the administration of Richfield
Section 312 loans; and
WHEREAS, an agreement for loan processing services has been
developed between the Richfield HRA and the St. Paul HRA; and
WHEREAS, procedural guidelines have been established to
further define program requirements and administrative
responsibilities of the Richfield HRA and St. Paul HRA; and
WHEREAS, the HRA has had an opportunity to review these
procedural guidelines.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Authority in and for the City of Richfield,
Minnesota, that the Executive Director is authorized to:
1. Implement the Richfield Section 312 Rehabilitation Loan
Program in accordance with a procedural guideline.
2. Execute an agreement for loan processing services between the
Richfield HRA and the St. Paul HRA.
Passed by the Housing and Redevelopment Authority of
Richfield, Minnesota this 29th day of August, 1988.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
~~
CiT~ ®E RICNEiEL®, MINNESOTA
HRA LETTER N0. 26
.August 29, 1988
Issue Statement:
Adoption of resolution approving the issuance of a Certificate of
Completion, .Market Plaza/Market Towers.
Background-
A Contract For The Sale of Land For Private Development provided
for the development of Market Plaza and Market Towers. The
contract was dated May 14th, 1984. Article IV, paragraph 9
provides for the issuance by the HRA of a Certificate of
Completion. In accordance with the contract, the developer
recently requested the issuance of the certificate. Staff of
appropriate departments and divisions were requested to determine
if the development was completed according to approved plans.
The response was affirmative.
Recommendation:
Adopt the attached resolution approving the issuance of a
Certificate of Completion.
Alternative Recommendation:
Do not adopt the resolution.
Decision Mode:
The developer has requested the certificate and staff has
indicated the development has been completed according to
approved ,plans,
Respectfully submitted,
~~
ames D. Prosser
ity Manager
JDP:sae
~~,~
HRA RESOLUTION N0.
THE HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD, MINNESOTA
AUTHORIZING EXECUTION OF A CERTIFICATE OF
COMPLETION FOR MARKET PLAZA
WHEREAS, the Housing and Redevelopment Authority in and for
the City of Richfield, Minnesota (HRA) entered into an Agreement
with Market Plaza Housing Limited Partnership, and, Market Plaza
Commercial Limited Partnership, Minnesota partnerships,
(Developer), dated May 14, 1984, pursuant to and in furtherance
of the LHN Redevelopment Project heretofore adopted by the City
and the HRA; and ,
WHEREAS, the Agreement obligated the Developer to construct
certain improvements to property identified in that Agreement;
and
WHEREAS, Article IV of the Agreement required the HRA. to
inspect the project and furnish the Developer with a Certificate
of Completion upon completion of the construction; and
WHEREAS, the Agreement establishes the form for the
Certificate of Completion in Exhibit C; and
WHEREAS, Community Development and Public Safety staffs have
inspected the improvements and found them to be in accordance
with the terms of the Agreement.
NOM, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Authority in and for the City of Richfield,
Minnesota:
That the Chairman a.nd Executive Director are directed to
execute the Certificate of Completion and deliver same to the
Developer.
Passed by the Housing and Redevelopment Authority of
Richfield this 29th day of August, 1988
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
~~
CERTIFICATE OF COMPLETION
The undersigned hereby certifies that MARKET PLAZA HOUSING
LIMITED PARTNERSHIP, a Minnesota partnership, and MARKET PLAZA
COMMERCIAL LIMITED PARTNERSHIP, a Minnesota partnership have
fully and completely complied with their obligations under
Article IV of that document entitled "Contract For The Sale Of
Land For Private Development", dated May 14, 1984, between the
HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF
RICHFIELD (HRA) and MARKET PLAZA HOUSING LIMITED PARTNERSHIP,
MARKET PLAZA COMMERCIAL LIMITED PARTNERSHIP, with respect to
construction of the Improvements for the Shopping Center and
Housing Component B in accordance with the approved construction
plans and are released and forever discharged from their
obligations to construct under such above-referenced Article for
the Shopping Center and Housing Component B.
Dated:
HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD
By
Its Executive Director
By
Its Commission Chairperson
~~
CITY OF RICHFIFL®, MINNFS~TA
HRA LETTER N0. 25
August 29, 1988
Issue Statement:
Adoption of a resolution authorizing submission of an application
to HUD requesting an allocation of Section 8 housing payment
assistance.
Background:
Richfield HRA staff, in cooperation with the Area HUD office and
the Metropolitan Council HRA (Metro), is proceeding with the
establishment of an independent Section 8 program for Richfield.
The HRA and City Council authorized staff to proceed in this
manner in June, 1988.
Cooperation characterizes the discussion and negotiations to
date. HUD is supportive and is identifying. housing assistance
funding which can be utilized in Richfield. The Metro HRA has
indicated they will assist Richfield in securing housing
assistance from HUD, developing the program, and arranging the
fiscal process.
Richfield's role in the process has been to participate in
negotiations and prepare an application request for housing
assistance vouchers and certificates. Since the Richfield/Metro
HRA program presently serves 358 households, a combination of 358
vouchers and certificates is sought. Any new allocation of
vouchers and certificates from HUD will be exchanged, one for
one, with those from Metro HRA that presently serve Richfield
households.
The application was submitted to HUD on August 10, 1988 so that
processing could begin. However, HUD will not allocate housing
assistance to Richfield unless the HRA has, by resolution,
authorized submitting the application and these other required
materials as they are prepared: equal opportunity plan,
administrative plan, tenant allowance schedule, annual cost
estimates, program budget. Outside assistance will be sought to
help develop the required documentation. Help will also be
needed when the one for one rent assistance exchange occurs. (It
is anticipated that September and October will be busy months as
an independent program is developed for implementation).
Recommendation:
Adopt the attached resolution which authorizes an application and
other documentation to be submitted to HUD to secure Section 8
housing assistance.
Basis for Recommendation:
1 The HRA has previously authorized staff to proceed with an
independent program.
2) Section 8 housing assistance cannot be secured from HUD
without submitting the application.
'~ ~` f
3) Officials representing HUD and Metro HRA are cooperating
in the application for and exchange of benefits to
Richfield households.
Alternative Recommendation:
Do not support an application. However, this will leave
Richfield without Section 8 housing assistance in October, 1988.
Decision/Discussion Mode:
Adoption of the resolution now will help facilitate a smooth
transition by October.
Respectfully submitted,
~~~-
ames D. Prosser
ity Manager
JDP:sae
~#~°~?
HRA RESOLUTION N0.
AUTHORIZING HOUSING PAYMENT ASSISTANCE APPLICATION
WHEREAS, the Housing and Redevelopment Authority, in and for
the City of Richfield (Richfield HRA) has the desire and
capability to contract directly with the United States Department
of Housing and Urban Development (HUD) to provide housing
assistance in the City of Richfield; and
WHEREAS, HUD, on August 2, 1988, has determined that the
Richfield HRA is legally organized under Minnesota State Law; and
WHEREAS, HUD and the Metropolitan Council HRA are
cooperating in ensuring a successful transition to an independent
program for Richfield; and
WHEREAS, this cooperation and other resources available to
the Richfield HRA will ensure a timely utilization of any housing
assistance that is allocated; and
WHEREAS, an allocation can be processed by HUD provided that
the Richfield application authorizes submitting an: equal
opportunity plan, administrative plan, tenant allowance schedule,
cost estimates, program budget, and other documents as requested
by HUD; and
WHEREAS, an application to provide housing assistance to 358
households has been prepared and submitted to initiate
processing.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Authority in and for the City of Richfield, that
the Executive Director is authorized to submit to the United
States Department of Housing and Urban Development an application
and other documentation in support of a request for housing
assistance payments to serve Richfield residents.
Passed by the Housing and Redevelopment Authority of
Richfield this 29th day of August, 1988.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
n~
CITY OF RICHFIELD, MINNESOTA
HRA LETTER N0. 24
August 29, 1988
Issue Statement:
Adoption of resolution approving modifications to the Richfield
Home Rehabilitation Deferred Loan Program.
Background:
The HRA's Richfield Home Rehabilitation Deferred Loan program
provides rehabilitation assistance to lower income Richfield
homeowners. Each year the HRA utilizes a portion of the CDBG
funds allocated to the City from Hennepin County for
rehabilitation loans.
By assisting approximately 15-20 households each year, the
Deferred Loan Program plays an important role in achieving an HRA
goal to preserve and maintain the City housing stock. Since 1976
approximately 230 households have benefited from approximately
$1,500,000 in CDBG funded repairs. Major building system repairs
usually include electrical and plumbing updating, furnace
replacement, weatherization, roofing and exterior maintenance.
Approximately 50 percent of the funds benefit elderly households
and the remainder benefits single parent and family households.
The Deferred Loan Program is administered by the HRD in
accordance with the Richfield Home Rehabilitation Programs'
Procedural Guides. These guidelines, based on program criteria
established by Hennepin County and the HRA, last had major
revisions in 1984.
Recently, the County has modified deferred loan program criteria
and seeks HRA concurrence. Based on local experience in
administering the program, the proposed changes are needed.
Eight changes are identified:
1) Increase maximum loan amount
2) Increase amount available for accessibility
improvements.
3) Modify asset limitation
4) Require additional contractor documentation
5) Establish partial contract payment procedures
6) Establish process for bankruptcy/foreclosure
7) Establish procedures for post construction problems
8) Reduce number of bids required.
An attachment to this letter summarizes the rationale for each
change.
Recommendation:
It is recommended that the HRA adopt the attached resolution
authorizing the identified modifications to the Richfield Home
Rehabilitation Procedural Guide.
~~
Basis of Recommendation:
1. Enables more thorough rehabilitation per individual
property.
2. Accommodates needs of lower-income Richfield homeowners.
3. Facilitates more efficient program administration.
Alternative Recommendation:
Not authorize modifications to the Rehabilitation Deferred Loan
Program. This would preclude improvements to the program and
hinder program effectiveness.
Decision/Discussion Mode:
If the HRA concurs, the recommended modifications will become
effective immediately.
JOP:sae
Respectf lly submitted,
~,t1~
ames D. Prosser
ity Manager
'~ oG-
PROPOSED CHANGES
HOME REHABILITATION DEFERRED LOAN PROGRAM
AUGUST, 1988
1. Increase Maximum Loan Amount
Currently, the maximum Deferred Loan amount is $8250 per
household.. In past years it has been increasingly
difficult to complete all necessary repairs with this
amount of funds. While the average loan approximates
$5800, there are times when households in need could
benefit from slightly more funding.
To allow more thorough rehabilitation of properties, the
maximum loan amount would be increased to $10,000 per
household. Matching funding sources would continue
to be sought to minimize CDBG commitments.
2. Increase Maximum Loan Amount For Accessibility Improvements
Accessibility improvements may include the installation of
exterior ramps, handicap toilets, grab bars, replacement
of floor covering, and widening of doorways to improve
wheelchair mobility. Currently, a deferred loan for
accessibility improvements must not exceed $2500 over the
present maximum loan amount.
The cost of accessibility improvements however, often exceeds
the $2500 additional loan allocation. Thus, a larger portion
of total loan funds are required to complete necessary
accessibility improvements, leaving limited funds for
non-accessibility improvements.
To ensure that adequate funds are available for necessary
non-accessibility improvements, the maximum loan amount for
accessibility improvements will be increased to not exceed
$5000 over the new maximum loan limit.
3. Modify Asset Limitation
Currently, an applicants assets cannot exceed $25,000. In
some instances an applicant on a low, fixed income,
supplements that income with interest from savings or
investments. An exception is proposed which allows borrowers
who derive at least 1/2 of their income from interest income,
to have accumulated assets of up to $35,000.
4. Require Additional Contract Documentation
~-` oT
Currently, contractors are required to submit lien waivers
for the amount of the work performed prior to receipt of
payment. In addition, a Sworn Construction
Statement will be sought. This "statement"-lists all sub-
contractors and/or suppliers contributing to the work for
which an invoice is submitted. The construction statement
signed by the contractor, will ensure that the contractor
holding the Work Contract is more clearly responsible for any
failure to pay sub-contractors/suppliers involved in the
project.
5. Establish Partial Contract Payment Procedures
Currently, there is no established procedure for making
partial construction progress payments to contractors.
Partial payments are sometimes needed when the portion of
work is delayed because of weather or unavailability of
materials. The proposed procedure requires a holdback equal
to 10~ of the cost of completed work. This holdback will
function as a retainer to ensure that remaining work is
completed. The holdback amount. will be included in the
contractors final payment.
6. Establish Process For Recovering Lie n. In Bankruptcy
Cases and Foreclosures
Currently, there is no established procedure for recovering
liens related to deferred loans on properties involved in a
bankruptcy or foreclosure. Although this occurrence is
rare, once since 1975, staff wanted to clarify the process.
As individual cases may require different actions, the NRD
staff will contact legal counsel immediately upon receipt of
any bankruptcy or foreclosure notice. Legal counsel will
recommend appropriate action which may include the filing
of special notices by staff and joining in a foreclosure
action with another party.
7. Establish Procedure to Deal With Post Construction Problems
Currently, there are no established procedures far assisting
borrowers with the resolution of post-construction problems.
In the event that the HRA is notified of such problems, the
Deferred Loan Administrator will investigate the complaint.
When a warranty for repairs performed is in place, staff will
assist the owner in determining the problem and identifying
the process to follow with the contractor. If the warranty
has expired, or the contractor is no longer in business,
~-~_ ~
the repairs are of an emergency type, and the borrower is
still income qualified, additional Deferred Loan funds would
be made available. Alternately, on a case by case basis for
income qualified households,. adjustments may be made to the
lien amount based on the cost of correcting the deficiency.
The homeowner remains responsible for resolving the
construction problem with the contractor except in the
limited instances mentioned here.
8. Reduce Number of Bids Required
Currently, applicants are required to receive 3 competitive
bids for specified improvements. Difficulties encountered
by homeowners in obtaining contractor bids can delay loan
processing by several weeks and sometimes months. This
becomes increasingly discouraging to applicants during the
busy construction season. Staff time increases as
applicants become more frustrated.
The proposed change will adhere to guidelines suggested by
Hennepin County which require a minimum of 2 competitive
bids. However, applicants will continue to be encouraged to
receive 3 or more bids. The lowest bidder will be awarded
the work.
~~
HRA RESOLUTION N0.
RESOLUTION AUTHORIZING MODIFICATIONS TO
THE RICHFIELD REHABILITATION DEFERRED LOAN PROGRAM
WHEREAS, the Richfield Housing and Redevelopment Authority
provides a Rehabilitation Deferred Loan Program which utilizes
CDBG funds to assist lower income homeowners with rehabilitating
their homes; and
WHEREAS, the program procedural guides were approved by the
HRA in 1984 and are modified periodically as program requirements
and needs dictate; and
WHEREAS, Hennepin County and Richfield staff have identified
modifications to the program Procedural Guides; and
WHEREAS, the HRA has reviewed these modifications as
follows:
1. Increase maximum loan amount to $10,000 frgm $8,250
2. Provide up to $5.,000 rather than $2,500 for accessibility
improvements.
3. Modify maximum asset limit to $35,000 given special
circumstances.
4. Require use of Sworn Construction Statement by contractors.
5. Establish partial contract payment procedures.
6. Establish procedures for recovering liens in bankruptcy
cases and foreclosures.
7. Establish procedure to deal with post construction problems.
8. Reduce number of bids required.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Authority in and for the City of Richfield,
Minnesota, that the Executive Director is authorized to modify
Richfield Rehabilitation Deferred Loan Program Procedural
Guidelines as described herein.
Passed by the Housing and Redevelopment Authority of
Richfield, Minnesota this 29th day of August, 1988.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
RICHFIELD, MIMHESOTA
HRA LETTER N0. 23
August 29, 1988
Issue. Statement:
Adoption of resolution authorizing the acquisition of 7101 - 1st
Avenue South to provide affordable housing.
Background•
The HRA has utilized the Voluntary Acquisition Program since 1980
to acquire substandard properties for redevelopment. The Vo-Tech
and private developers have developed these sites with new
housing units for moderate income families.
In early 1988, approximately six homeowners offered their
properties to the HRA. There is approximately $40,500 in CDBG
funds already budgeted to pay for the purchase of one property.
The subject property which has been on the market in excess of
six months, is owner occupied, substandard as to structure
location, and has deferred maintenance.
This property has a 1988 assessed value of $40,500. The property
is listed by a realtor for $42,500. An independent appraiser
valued the property at $37,000. The lot dimensions are 49' x
128' (approximately 6,272 sq. ft.). The home is less that one
foot from the neighbors. property, was built in 1941, has
approximately 620 sq. ft. on one level, and one bedroom. The
subject property is not located in an area prone to storm water
flooding. A family of five presently owns and resides in the
dwelling and is contemplating a move to a more standard type
Richfield dwelling if their home can be sold. Several contract
for deed transactions since 1983 have been the norm. However,
the title appears to be a relatively routine matter to clear.
The Contract for Deed owners, the Shelley family, have executed
the "Waiver of Relocation" benefits form. Staff has negotiated a
purchase price of $39,750 pending authorization by the HRA and a
finding by the City Hearing Examiner (and City Council if
.necessary) concerning a variance request.
HRD staff seeks a variance because the lot width is approximately
one foot less wide than the minimum 50 foot width required for
development. All other City requirements could be met for
development. The variance request, presently in process, would
allow a standard type of dwelling to be located on the site.
There are 31 other lots within an adjoining eight block area that
have a lot width similar to the subject site. At a recent
meeting for neighbors conducted by staff, HRA involvement and
redevelopment of the site was welcomed.
The HRA would be responsible for site clearance and property
maintenance following acquisition. The 1988 revised/1989
proposed budget provides $4,500 to clear the site (Source: CDBG
XIV), $600 for legal work to acquire (Source: CDBG XIV), and $600
for property maintenance and insurance (Source: proceeds of sale
u ~-s
of 1988 Vo-Tech projects). The property would be tax exempt
until development occurs. It is anticipated that Vo-Tech would
build a new house on campus, starting in 1989, to fit the site.
It would subsequently be moved to this property.
Recommendation:
It is recommended that the HRA adopt the attached resolution
which authorizes the Chairperson and Executive Director to enter
into a purchase agreement and take other actions necessary for
the HRA to acquire the property at 7101 First Avenue for $39,750.
Basis for Recommendation:
1 The property owners are interested in selling to the HRA
through the Voluntary Acquisition Program.
2) The property qualifies for act~uisition in accordance with
Voluntary Acquisition Program Guidelines.
3) Funds have been budgeted for acquisition, clearance, and
maintenance.
4) The resolution has a contingency which voids the
acquisition if the Hearing Examiner makes an adverse
finding concerning the variance request and the finding is
supported by the City Council.
5) The Planning Commission has determined the acquisition and
disposition of this .property for single family purposes to
be in conformance with the Comprehensive Plan.
6) The subject property is the only one offered in 1988 which
can be purchased given the funds available.
Alternative Recommendation:
The HRA can choose not to acquire this property. However, staff
presently has no alternative for the timely expenditure of CDBG
funds and the development of a future Vo-Tech project. Any
alternative will not be less costly to acquire. Delay of the
action will prolong poor housing conditions for the seller.
Decisi®n/Discussion Mode:
Pending HRA authorization and the Hearing Examiner finding, the
property could be acquired between the end of August and mid-
Steptember.
Respectfully submitted,
/~~ S~
mes D. Prosser
ity Manager
JDP:sae
HRA RESOLUTION N0.
AUTHORIZING THE ACQUISITION OF
7101 First Avenue South
WHEREAS, the Housing and Redevelopment Authority (HRA) in
and for the City of Richfield acquires property, relocates
occupants, and builds and rehabilitates structures for
residential purposes; and
WHEREAS, the HRA desires to acquire the real property at
7101 First Avenue South, legally described as: Lot 24, Block 1,
Sheldon Blair's Wooddale Fourth Addition, Hennepin County; and
WHEREAS, the owner of 7101 First Avenue South, A. Guy
Shelley Jr. and Katherine Anne Shelley, has volunteered to sell
their property for $39,750; and
WHEREAS, the Planning Commission has found the acquisition
of this parcel for residential purposes to be consistent with the
Comprehensive Plan; and
WHEREAS, the lot width of 7101 First Avenue South is not a
standard size, and requires a variance to city requirements to
allow this acquisition and development to proceed; and
WHEREAS, Community Development Block Grant (CDBG) funds will
finance the acquisition of this parcel.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Authority in and for the City of Richfield,
Minnesota:
That the HRA
to take necessary
7101 First Avenue
these actions are
Richfield that th
a new home.
Chairman and Executive Director are authorized
actions to purchase the property located at
South for $39,750 utilizing CDBG funds and that
contingent on a determination from the City of
e lot width will not prevent the development of
Passed by the Housing and Redevelopment Authority in and for
the City of Richfield this 29th day of August, 1988.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
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SURROIR~Dr~Ki PFiOPERTES WITH WDTHS OF 48.81 1'b 49 FEET
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VIEW FROP~ 71ST STREET
NORTH & EAST SIDES OF HOME
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Sub j~ct Photographs
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CIT'~ DF RICIWIFIELD, MIq~gNES®TA
HRA LETTER N0. 22
August 29, 1988
Issue Statement:
Adoption of resolution approving Contract For Private Development
with Donald A. Johnson for property at 6941-45 Penn Avenue South.
Baclkground:
Dr. Johnson (Developer) practices dentistry at the Stewart
Building 6425 Nicollet Avenue. He has proposed to construct a
one story 3,800 square foot office building on vacant land at
70th Street and Penn Avenue. (See attached drawings).
The land is tax forfeited property being sold by Hennepin County
for $24,000. On March 16, 1987, the HRA informally instructed
staff to pursue purchase of the property from the County and sell
it to the Developer at cost.
The site has been rezoned to C-l, limited business. Both the
Planning Commission and City Council acted favorably on the
rezoning. However, staff has not published the ordinance pending
the redevelopment process so that site development can be
controlled.
The neighbors have been invited to speak at the HRA meeting
regarding building occupancy. (A letter announcing the
opportunity to speak was mailed to them). When the Developer
initially proposed the development, it was to provide space only
for dentists, although the C-1 zoning would make a wider range
of office uses acceptable. However, potential lenders have
indicated that to make the development more viable for the
future, a wider range of office uses must be acceptable. Thus,
the Developer is requesting that the office uses permitted be
more in keeping with those permitted in the C-1 district. The
neighbors should be given an opportunity to speak to the
acceptability of non-dental office uses. (The deed conveying the
land to the Developer would contain a restrictive covenant
permitting only office uses).
After consideration of the comments by the neighbors, it would be
appropriate to consider the significant items of the Contract.
It provides that the Developer will pay the HRA $33,037. A
deposit of $9,037 will be paid shortly after approval of the
Contract by the HRA. These funds will pay for staff and legal
time and a soil test. If the soil tests are acceptable, the
project would proceed and the Developer would pay the remaining
$24,000 for the land at the appropriate time. Construction would
be completed no later than December 31, 1989. If the project
does not proceed, because of poor soils or because the HRA is
unable to fulfill its responsibility, any unexpended balance of
the $9,037 would be returned to the Developer.
-- ~-~
The Contract also contemplates the establishment of a
redevelopment project. However, there would be no tax increment
financing. For the HRA to acquire the property from the County
and sell it to the Developer, there mutt be a redevelopment
project. In the coming months the redevelopment plan would be
presented to the HRA, Planning Commission and City Council for
action.
Currently no tax revenue is being generated by this property.
Although the developer has not yet selected a contractor,
preliminary estimates indicate the improvements will be valued at
$300,000 to $400,000. This project would generate total taxes in
the range of $14,000 to $19,000.
Recommendation:
1. Solicit comments from the neighbors regarding expansion
of the list of permitted uses to conform more closely with
those of the C-1 zoning district for offices.
2. Adopt the attached resolution approving the Contract.
ABternative 9teco~amendation:
1. Do not approve the Contract.
Decision/Discussion Mode:
An approval of the contract would permit the redevelopment
documentation process to begin which will take until December to
complete.
Respectfully submitted,
JDP:sae
ames D. Prosser
ity Manager
` ' A oG,~
RESOLUTION N0.
THE HOUSING AND REDEVELOPMENT AUTHORITY
IN AND FOR THE CITY OF RICHFIELD, MINNESOTA
APPROVING CONTRACT FOR PRIVATE REDEVELOPMENT WITH
DONALD A. JOHNSON
WHEREAS, the Housing and Redevelopment Authority. in and for
the City of Richfield, Minnesota (HRA) has received a proposed
document entitled "Contract for Private Development" dated
1988 (Contract), which Contract is on file in the
office of the City Clerk for inspection; and
WHEREAS, the HRA has reviewed the Contract and determines
that such is in the best interests of the City and serves the
health, safety and general welfare of the community; and
WHEREAS, the City of Richfield is also to be party to this
Contract.
NOW, THEREFORE, BE IT RESOLVED by the Housing and
Redevelopment Authority in and for the City of Richfield, as
follows:
That the Contract is hereby approved and the Chairman and
Executive Director are hereby authorized and directed to execute
the same on behalf of the .Housing and Redevelopment Authority.
Passed by the Housing and Redevelopment Authority in and for
the City of Richfield, Minnesota this 29th day of August, 1988.
Thomas E. Harms, Chairperson
ATTEST:
Joan Helmberger, Secretary
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