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07-15-86 agendar HOUSING AND REDEVELOPMENT AUTHORITY Office of .Executive Director HRA Letter No. 17 Agenda July 15, 1986 Housing and Redevelopment SPECIAL MEETING Authority Commissioners City of Richfield Subject: Amending Agreements, Authorizing Public Improvements; New Home Program Activities Dear Commissioners: A special HRA meeting has 'been scheduled to take timely action related to development agreements and the sale of HRA owned properties. An HRA memo in June, 1986, discussed the status of New Home Program activities. As the memo indicated, once details of the Minnesota Housing Finance Agency (MHFA) bond sale for home financing had been confirmed, amendments to program related agreements would be necessary. On July 3, 1986 staff was notified by MHFA that: -the HRA will have access to $500,000 of 8.65% mortgage money for 30 days starting July 16, 1986. -qualified applicants must be submitted to the lender prior to August 15, 1986. -the $240,000 balance needed to finance all the units under construction may or may not be available depending upon statewide demand and competitive "luck". This letter requests that: -the Rae Drive/66th Street Development Agreement be amended. -the 7508 Colfax Development Agreement be amended. -the Purchase Agreement for 920 West 66th Street be extended. -public improvement work be authorized at the Rae Drive/66th Street development area. A discussion of each requested action follows. Amendments to Development Agreements Since late winter, the Rae Drive twinhomes at the intersection of 66th Street and Rae Drive have been under construction. A single family home at 7508 Colfax Avenue South is nearing completion. George E. Branton Construction Company is responsible for construction and sale of the units based on a development agreement with the HRA. At the end of March, 1986, a sales meeting was held to identify potential purchasers for these units. On a preliminary basis, seven families have been identified for the eight-two and three bedroom-twinhomes. A family has also been identified for the three bedroom single family home. The twin homes and single family homes are being marketed to persons having moderate incomes; i.e., 80% of the median income for the metropolitan area as determined by the Department of Housing and Urban Development (HUD) and MHFA. For all the 3 bedroom twin home units (there are four by George E. Branton and two by the HRA) that are located within the Rae Drive/66th Street area, the following family size and income requirements were specified in the development agreement as indicated below in the column titled "Old". However, HUD has recently increased the income limits. The new limits are indicated below in the column titled "New". Old Maximum Family Size Income Limits New Maximum Income Limits 3 $23,600 $24,750 4 $26,250 $27,500 5 $27,900 $29,200 6 $29,550 $30,950 Most of the interested 3 bedroom home purchasers have incomes that are below the new limits but at or above the old limits. For the two bedroom twin home units (there are four by George E. Branton) that are constructed within the Rae Drive/66th Street area, MHFA required the units to be marketed to smaller two to four member families with incomes not exceeding $28,000. HUD had no specific requirement .for these units. To ensure a quick commitment of the mortgage money, MHFA would now allow incomes not to exceed $35,000. Mr. Branton and staff would continue to work with purchasers that have already been identified with incomes within the old limits. But, if it becomes necessary to identify additional purchasers, the new income limits would be followed. Processing of applications was delayed and construction was slowed while mortgage finance arrangements with MHFA were being reviewed. Now that MHFA has finalized its course of action, adjustments can be made to key performance dates within the development agreements. The HRA must act quickly since on July 16, 1986 the following will occur: -Mr. Branton would default on performance since all units were to be completed and closed by this date. -Mr. Branton's construction financing, which is tied to this key performance date, would default. -A $23,200 letter of credit, held by the HRA for liquidated damages relating to failure to construct the project, would expire. The July 16th deadline was originally devised because of MHFA requirements for the mortgage commitment and delays have been related to MHFA actions. Mr. Branton is not at fault for any delays that have occurred. The development agreement amendments, which have been drafted by legal counsel for the HRA and Mr. Branton to execute, accomplish the following: -extend construction completion dates to September 5, 1986 -require Mr. Branton to submit all applicants to the lender by July 31, 1986 (new applicants must continue to be identified by him as necessary until August 15, 1986; ensuring the entire $500,000 set aside is secured). -require closings to occur by October 31, 1986 -extend the letter of credit -reduce the MHFA mortgage discount points required to be paid by the developer at closing to 2 1/2 rather than the 3-1/2 points since MHFA changed this requirements. -allow Mr. Branton to rent the completed single family home at 7508 Colfax Avenue to the mortgage applicant until closing occurs. According to the lender, the applicant appears to be qualified. -increase the maximum income limits for purchasers of two bedroom units to $35,000 and three bedroom units to: Family Size Maximum Income 3 $24,750 4 $27,500 5 $29,200 6 $30,950 Extending the Purchase Agreement for 920 West 66th Street Located within the Rae Drive/66th Street development area is the twinhome completed by South Hennepin Vo-Tech. The units at 920 and 924 West 66th Street have been completed since the Spring of 1985. A qualified purchaser, the Louris family, has been identified for 920 West 66th Street. Since mid-1985 the family has rented the dwelling unit in anticipation of closing. Simultaneously, the entire development project was planned, financing was secured, a developer was selected, and construction initiated. The HRA held a public hearing authorizing the sale of the unit to the Souris family. The unit has remained unsold while MHFA resolved issues related to its financing program. During this long wait, the purchaser remains interested. However, the financing arrangements are still uncertain. The HRA had originally secured approximately $740,000 in 9.95% mortgage money from MHFA. This amount was adequate to finance all 12 units of housing initiated by the HRA. Now only $500,000 will be available at 8.65%. Thus, Mr. Branton's eight twinhome units have a financing commitment. However, there is no financing commitment for Mr. Branton's single family home at 7508 Colfax Avenue; the HRA owned properties at 920 and 924 West 66th Street; and 7245 Humboldt Avenue South. Even though there is no funding commitment, staff is confident that the following course of action will successfully secure favorable financing for the units: 1) On or before July 16, 1986, Mr. Branton and staff will submit executed purchase agreements for 7508 Colfax and 920 West 66th Street, respectively, to the lender (Rothschild Financial) to compete. for a portion of a statewide pool of 8.65% funds available from MHFA. 2) If a MHFA commitment cannot be secured, then FHA financing at or below 9.95% (i.e. the original rate promised the purchasers) would be secured and closing on these units would proceed as soon as possible. 3) An FHA mortgage commitment at or below 9.95% for 7245 Humboldt would be secured for the purchaser the HRA, approved in June, 1986. MHFA financing no longer appears practical since the MHFA program requires the .sales price (with second lien) to be limited to $75,000 while the actual value of the house more closely approximates $85,000. 4) During July, a purchaser will be identified for 924 West 66th Street. The HRA will be requested to hold a public hearing concerning the sale once a buyer has been identified. It is anticipated that sometime in August, there may be MHFA 8.65% funds "leftover" from the initial competitive round. If so, a commitment would be secured at that time or FHA financing would be considered. Legal counsel has drafted an extension of the 920 West 66th Street purchase agreement for the HRA and the Louris family to execute. Authorizin Proceed Rae Drive/66th et Public Improvement Work to The development agreement between the HRA and George Branton Construction Co. specified certain responsibilities of the HRA. Within the public right-of-way and up to the front property line, the HRA is responsible for providing residential sewer line service to the two westerly units (10.16 and 1018 West 66th Street); residential city water service to all four westerly units (1008, 1012, 1016 and 1018 West 66th Street); and curb and gutter, sidewalk, and driveway apron concrete installation and replacement to satisfy requirements of the attached site plan. The anticipated cost of these improvements were included in the approved and the revised 1986 budget. The funding source includes CP705 for work to be completed along 66th Street (sewer, water, concrete) and CDBG funds for work to be completed along Rae Drive (concrete). CP705 funds would be utilized to install a sewer line to service the westerly portion of the development area. The original 66th Street road improvements widened the roadway, leaving the sewer line for this property located in westbound traffic lanes rather than at the property line. The change in grade of the roadway left the existing sewer line stub at too shallow a depth to be used. CP705 funds would also be used to install water service to the property line and reduce the number of driveway openings along 66th Street to conform to present turn lane openings for traffic in the center median. If the HRA concurs, the City Council would be requested to authorize CP705 public improvement expenditures for these improvements within the 66th Street right of way. Specifications for the work were prepared and staff solicited informal bids. A formal bidding process was not required in anticipation that the cost for each type of work would not exceed $15,000. State law requires a more extensive process when this amount is exceeded. Bids were received in the following amounts from the following contractors. For the sewer service: Star Plumbing and Excavating $ 9,000.00 For the water service: Star Plumbing and Excavating $ 6,000.00 For the concrete work: Gunderson Brothers Cement Contractors $ 8,596.00 Southside Concrete Contractors $17,619.00 The sewer service was the most difficult job for which to obtain bids. It requires a portion of 66th Street to be closed and excavated and several utility services to be located and avoided. Several contractors, including Richfield Plumbing, Blaylock Plumbing, Aqua City Plumbing, Ray Haeg Plumbing, Grand Hagen Plumbing and Spetz and Berg, declined to bid because of the difficulty of the job and the need for the use of heavy equipment. City Sewer Division personnel are familiar with Star Plumbing and feel they are capable of satisfactorily undertaking the job. Regarding the concrete work, Gunderson Brothers Cement Contractors has a contract with the City for concrete alley replacement work. The City Engineering Division has been very satisfied with the work. Based on the bids received, Star Plumbing and Excavating would undertake the sewer service and the water service installation. Gunderson Brothers would install the concrete work. Each contractor would be required to submit a performance bond for the total amount of work, provide evidence of insurance, and execute a standard form contract with the HRA that has been reviewed by legal counsel and approved for use for construction projects such as these that are of limited scope. Recommendation: It is recommended that the HRA adopt the attached resolution authorizing; 1) amendments to the Rae Drive/66th Street and Colfax development agreements 2) extension of the purchase agreement for 920 West 66th Street with the Louris family; and 3) public improvement work to be undertaken as follows: Star Plumbing and Excavating, sewer service installation for $9,000 Star Plumbing and Excavating, water service installation for $6,000 Gunderson Brothers, concrete installation for $8,596 Acting Executive Director HRA RESOLUTION N0. RESOLUTION FOR AMENDING AGREEMENTS AND AUTHORIZING PUBLIC IMPROVEMENTS; NEW HOME PROGRAM ACTIVITIES WHEREAS, the Housing and Redevelopment Authority (HRA) in and for the City of Richfield has considered the status of the 66th Street/Rae Drive housing development, the 7508 Colfax Avenue South housing development, the sale of 920 W. 66th Street, and planned public improvements adjacent to the 66th Street and Rae Drive housing development; and WHEREAS, the HRA has determined that it is appropriate to amend development agreements with George E. Branton Construction Company relating to 66th Street/Rae Drive and 7508 Colfax Avenue South housing developments; amend the terms of a purchase agreement previously authorized by the HRA to sell 920 W. 66th Street to the Louris family, and authorize public improvements such as sewer service, water service, and concrete work adjacent to the 66th Street/Rae Drive housing development based on bids from qualified contractors. NOW, THEREFORE BE IT RESOLVED by the Housing and Redevelopment Authority in and for the City of Richfield, Minnesota: 1. That the Chairperson and Acting Executive Director are authorized to execute amendments to the "Development Agreement Between The Housing and Redevelopment Authority In and For the City of Richfield, Minnesota, and, George E. Branton Construction Company" concerning a housing development project in the 66th Street and Rae Drive Area. 2. That the Chairperson and Acting Executive Director are authorized to execute amendments to the "Development Agreement for 7508 Colfax Avenue South Between The Housing and Redevelopment Authority In and For the City of Richfield, Minnesota, and, George E. Branton Construction Company". 3. That the Chairperson and Acting Executive Director are authorized to execute amendments to the "Purchase Agreement for a Twin Home" with the buyers, Jon and Lisa Louris. 4. That upon execution of a contract by the Chairperson and Acting Executive Director a) Star Plumbing and Excavating is authorized to initiate and complete the sewer service according to specifications for $9,000, b) Star Plumbing and Excavating is authorized to initiate and complete the water service according to specifications for $6,000; and c) Gunderson Brothers Cement Contractors is authorized to initiate and complete the concrete work according to specifications for $8,596; 5. That the Acting Executive Director is directed to request the City Council to allocate CP705 funds to fund the public improvements on 66th Street. .Passed by the Housing and Redevelopment .Authority in and for the City of Richfield, this 15th day of July, 1986. Thomas E. Harms, Chairperson Joan Helmberger, Secretary