Loading...
08-19-85 agenda~~_ HOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director HRA Letter No. 43 Agenda August 19,.1985 Housing and Redevelopment Authority Commissioners City of Richfield Subject: Authorization to Initiate Negotiations For A Developer's Agreement with CDR (Minnesota Inc.) in the ILN Study Area Commissioners: At the June 17, 19.85, HRA meeting, a presentation was made regarding the concept formulated by CDR (Minnesota Inc.) for the development of the property located in the northeast earner of the I35W-494 intersection. This property is located. in the ILN Study Area. _ CDR desires tb initiate construction on the property-in the spring of 1986. However, before construction can be initiated, several issues must. be addressed by the City Council and the HRA. The roles and responsibilities of each party with regard to the various aspects of the project must be identified. Similarly, both the city and the developer should have a clear understanding of the proposal and the expectations of each party. This is the essential first step in this type of development process and lays the foundation for a developers agreement. In order to secure this information in time to aceomodate a Spring 1986 construction start, discussions between the city and the developer should be initiated immediately. Issue identification will also be of value in completing the ILN planning study in a timely manner as well. It is recommended that the negotiations far a developer's Investments Inc.). HRA authorize staff to initiate agreement with CDR (Minnesota Res tfully s bmitted, ~~~ e en L. Devich Acting Executive Director SLD/e ja ~~ / HOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director HRA Letter No. 42 Agenda August 19, 1985 Housing and Redevelopment Authority Commissioners City of Richfield Subject: Selection of Developer, 66th Street and Rae Drive, and, Colfax Avenue Family Housing Sites Dear Commissioners: At the March 18, 1g85,~HRA meeting,. staff was authorized to pursue several tasks relevant to actions concerning the development of eight units of housing at the 66th Street and Rae Drive area, and one single family home at 7508 Colfax Avenue. Key tasks included securing below market interest rate mortgage money, identifying a qualified developer with an acceptable concept plan which conformed to the design guide, and formulating an "interest reduction program" that makes the units more affordable to moderate income first time homebuying families. This letter discusses the key tasks-and makes brief comments concerning the developer competition, neighborhood participation in plan review, contents of a developers agreement, and the development time schedule. It requests the fallowing actions: -That George E. Branton Construction Co., be selected as the developer far the project; -Staff be authorized to negotiate a developers agreement which would be submitted to the HRA in October, 1985• The hearing on the land sale would be held at this time. -Direct the developer to prepare a detailed preliminary .plan. This plan would be available at the September 16, 1985 HRA meeting and would be the basis far the Planning Commission and City Council review and approval for rezoning to a "Planned Two Family Residential District" planned unit development (PUD) anal replotting. -Approve .the Housing Development Project Plan, Interest Reduction Project Plan, and, Interest Reduction Program Regulations. -Authorize staff to initiate a process which would result in the liquidation of certain assets to provide revenue. for the interest reduction assistance. -2- Mortgage Financing /-~ On July 31, 1985, the city manager on behalf of the HRA executed commitment agreements with the Minnesota Housing Finance Agency to secure $744,000 in 9.95 percent fixed rate 30 year mortgage money. Approximately $575,000 would be made available to the selected developer through. a developers `- agreement for the eight housing. units at 66th Street and Rae Drive and one housing unit at 7508 Colfax Avenue. The additional monies are committed to financing the sale of the Vo- Tech units at g20 and 924 W. 66th Street and 7245 Humboldt Avenue. The lender, TCF Mortgage Corporation of Edina, and the HRA shared in paying a $22,320 refundable commitment fee to hold the funds through the end of July, 1986. The selected developer will be required to .reimburse TCF for their portion of the contribution when a developers agreement is executed, or no later than November 19, 1985•. The HRA will be reimbursed for its share as closings with eligible buyers occur during the second quarter of 1986. TCF, located at 3205 W. 76th Street, would originate all the loans and assist purchasers with the qualifying process. Identifying a Developer In mid-June, approximately 100 metro area developers of. modest cost hou-sing and architects specializing in housing were solicited to develop up to seventeen units of scattered site housing. (Eight units of housing at the 6941-45 Penn Avenue vacant parcel have since been dropped from the proposal because of HRA direction.) Several indicated .interest in the project. However, response was restrained for a variety of reasons. including the size and nature of the project and the contractor's workload. Four firms requested an entire application package to compete in the selection process. Each firm felt the project was feasible. However,. only the George E. Branton Construction Co., responded by the July 23, 1985, deadline with a complete proposal. The principal representative, Mr. George E. Branton, has been invited to attend the August 19th HRA meeting. Recommended Developer George E. Branton Construction Co. of Bloomington, Minnesota is a Minnesota corporation organized in 1976. The company has built housing in the southern metropolitan area. Initially, the housing was custom built, "upper bracket" homes in west Bloomington. In recent years the company has erected modest cost housing in Burnsville, Apple Valley, and Lakeville. The latest project, 52 townhouse units in Lakeville (the project is _ 3 _ ~"J 75 percent completed) is a cooperative effort with the Dakota County HRA as part of their 198 first time homebuyer program. The price range of the. townhomes is $55,900 to $71,900, with a total project value of $3,588,000. At the June, 198~-, HRA meeting, George Branton was one of the developers that provided expert testimony on the 66th Street and Rae Drive site. Mr. Branton was picked to testify, in part, because a unit ($56,000 - $60,000) in the Lakeville. development was specially recognized by the Metropolitan. Council. for its value, general appeal, livability,. and low energy use. Staff contacted various Lakeville and Dakota County officials, Mr. Branton's construction financing lender and several sub-contractors concerning the George E. Branton Construction Company. Additionally, a homeowner who has resided in a custom built Branton home for seven years. was also contacted. All individuals contacted indicated there have been no problems with the George E. Branton Construction Co. and that the firm operates in a fiscally responsible manner. In written documents, Mr. Branton also indicates he is a responsible developer. He has provided the HRA with a performance bond in the farm of a certified check in an amount of $10,000. In interviews with staff, Mr. Branton has indicated an interest in utilizing Richfield. area contractors; RB Thompson Lumber, and Midland: Heating. Mr. Dale Wille, a Richfield resident, is Mr. Branton's landscape architect. TheConcept Development Plan: As required by the Design Guide approved by the HRA in March, eight. housing units have been proposed for the 66th Street and Rae Drive site. A single family home has been proposed for 7508 Colfax Avenue.. Copies of the proposal are included. with this letter (site plans front and rear elevations, and floor plans). The proposal identifies four two bedroom units and four three bedroom units arranged as double homes. The single family home on Colfax Avenue would have three bedrooms. The two bedroom units would be sold to families having two to four members. The three bedroom units would be sold to families having three to six members. One staff objective is to keep the initial prices in the low $60,000 area. Prices may increase or decrease as the amenities and housing design. details are finalized. The proposed units have an initial price range of $59,000 to $66,000 excluding land. (The HRA would sell the land to the developer at no cost _µ_ ~` but retain a second lien of approximately $12,000 per unit to recover land value should the initial purchasers sell at some future time). The na cost land sale to the developer must be passed through to the purchasers. The proposed living spaces range in size from 900 to 1250 sq. ft. depending on number of bedrooms. Thee construction cast per sq. ft. approximates $48 (excluding land), an acceptable `- cost for this type of unit. These figures are also subject to _ 'slight changes as more detailed plans are developed. The proposed units are arranged with one, one and ane half, and two stories to provide a variety of roof lines and living spaces. Since basements are an additional cost for one and two story units, and two story construction is the mast expensive, an alternative design will be considered that provides a 1-1/2 story rather than 2 story unit. The types of amenities proposed include vaulted ceilings, skylights, bay windows, kitchen pass-throughs, walk in closets in the master bedrooms, basements, patio decks, double car garages for all three bedroom units, (and same of the two bedroom units), a centrally located "tot lot" or individual play spaces, and more. than required open off street parking spaces. There are 14 covered parking spaces and at least 12 open parking spaces. When combined with the existing dwelling at 920/924 W. 66th Street, there will be approximately 3 off-street spaces per unit. Building and landscape materials will be more clearly identified in future plans. The exterior building materials are intended to be low. maintenance and compatible with existing. housing. The landscaping is intended to be appealing and an effective screen for individual units and the adjacent neighborhood. The developer has assured staff that. the grading and drainage plan, once formulated, will divert surface water to 66th Street and Rae Drive, away from existing neighborhood housing and the new living units. The site plan and exterior finish would be designed to integrate with the existing double unit at 920 and 924 W. 66th Street. HRD staff, the building official, assistant fire chief, city planner, and city. engineer have had an opportunity to review and comment on the concept plan/proposal. Dan Feidt, an architect with Val Michelson and Associates, reviewed the plans on a consulting basis to ensure compliance with the Design Guide. (Because Michelson and Associates was not associated with the developer, it was appropriate for them to evaluate the proposal). The initial findings indicate: -slightly mare "green area" is recommended to meet PUD requirements. -more recreational space (in addition to deck and the tot lot) is recommended to meet PUD requirements, but may not be feasible given space limitations. -5- l~~ ' -decks, except if at ground level, cannot project into the rear 25 ft. set back area. -curb-cuts and driveways may be wider than necessary. -sewer lines to the existing housing are known to be shallow so new lines running to 66th Street are appropriate. -fire truck access would be restricted such that an additional fire hydrant, a special walkup fire lane or `- sprinklers for individual units should be considered. -building specifications and plans must be more detailed before findings can be made as to code compliance. It is the opinion of staff that all of the above findings can be satisfactorily resolved. In reviewing the design guide, the consulting architect determined that the proposed plan provides: -transition between the single family housing to the north and busy bbth Street on the south -good vehicular access (except for fire trucks as just mentioned) -effective screening -a good tat lot location -the retention of most trees -buried telephone and power. lines -marketable units with good livability Mr. Brantonts proposal also includes a construction timetable, a marketing plan, the developers profit, and details about the Homeowners Association fee. A construction start of December 1, 1985 is the objective. The first units would be completed in March, 1986. One of the completed units would be used as a model although it is anticipated that marketing prior to and- during construction may provide a sufficient demand. Sales would be completed prior to the end of July, 198b. Mr. Branton would personally handle the sale of the units and is experienced in so doing. The commission cn each sale approximates 2 percent or $1,250. The developer profit for construction is estimated. at approximately 12.5 percent, or $48,000. These figures appear reasonable since sales commissions are often 5 to 6 percent and returns on construction range from 10 to 20 percent. The Homeowners Association would be responsible., after full occupancy, for grounds maintenance, snow removal, garbage removal, insurance, and a maintenance reserve. The estimated fee for these activities is $60 per unit per month. Prior to complete occupancy, Mr. Branton would assume responsibility for these items if selected as the developer. -6- Interest Reduction Program 1-~ As discussed in the March, 1985, HRA letter, even with attractive financing rates, modest construction costs, and deferred land cost to the initial purchaser, it is not possible to assure affordability to persons with a moderate income as required by CDBG regulations. CDBG funds were utilized to acquire the property. Thus,. a very specific moderate income range (i.e., 80°6 of the median income as established by HUD for the Section 8 program). related to family size must be adhered to for a majority of the units. The income limits that must be followed are: Family_Size Maximum Income 2 $21,000 3 $23,600 4 $26,250 5 $27,900 6 $29,550 Assuming. a $60,000 mortgage at 9.95 percent interest amoritized for 30 years, homestead property taxes based on an improved property with a $75,000 value (i.e., structure and land), hazard insurance, and the monthly Homeowners Association assessment,the monthly housing payment would be $689 per month. A household with a $22,000 income would be $139 Per month short of meeting payment; at $25,000, $6~ short, at $26,500, $27 short. An annual income of approximately $27,5.60 is required before assistance is no longer needed. However, this prevents. a majority of two to five persons households in the required income range from participating. The purchasers of previous Richfield HRA developed family housing and similar types of affordable housing in Minneapolis have had an average $24,000 to $25,000 annual income. To ensure that persons with the required incomes can afford the housing opportunity, there appears to be two alternatives: 1) Developer "buydown" of the housing payment during the initial years of the mortgage (in effect a reduction of the. mortgage interest rate from 9.95 percent down to say 7 to 8-1/2 percent depending on income) 2) A continuation of the buydown using revenues available to the HRA. Eight additional years of assistance after the developer pays .for the first two is recommended. The lender, MHFA, and mortgage insurance .representatives want to ensure that over the life of the mortgage, the purchasers will not be placed in a -7- ~ / risky financial situation before they are capable of assuming the full responsibility for the total monthly payment. Staff would verify incomes annually and modify the monthly assistance accordingly. Details of developer participation would be stated in the developers agreement. As closings occur an the sale of units, the Developer would place two years of assistance in a trust account. The assistance for the first two years would be based _ on the income status of the household as of the date of mortgage ,qualification. The anticipated total assistance from the developer; approximately $16,000 to $18,000 during the two year period, would then be disbursed directly to the loan servicer to meet housing payments requirements. For the HRA to participate in the .interest reduction program, a "Housing Development Project Plan, an Interest Reduction Project Plan", and, "Interest Reduction Program Regulations" would have to be approved by the HRA. A copy of these documents is included with this letter. The "Housing Development Project Plan and Interest Reduction Project Plan", pages 1 to 3 discuss: -the statutory authority HRA's have to undertake. projects -the projects (housing development and interest reduction) being undertaken -the public purpose being achieved by these two projects -the. project location (i.e., 66th Street and• Rae Drive) -the anticipated public actions that will occur to implement the projects (i.e.,-PUD rezoning, deferral of land costs, plat approval, review by the Planning Commission and City Council regarding consistency with the Comprehensive Plan). The Interest Reduction Program Regulations, pages 1 to 5, discuss in detail: (the regulations act as the administrative guideline) -the statutory authority for the program -the definition of terms and participants -the duration of the assistance, $ years as previously mentioned in this letter. -the eligible participants, according to income limits previously discussed -the mechanism for the return of a portion or all of the interest reduction assistance provided -the description of the trust account which holds the interest reduction funds until needed by the loan servicing agency -haw the assistance payments are secured -the source of revenues being utilized by the HRA _g_ f-(I -the reporting on an annual basis to the Minnesota Department of Energy, Planning anal Development, concerning a description and operation of the interest reduction assistance The repayment of the HRA's interest reduction assistance and the source of revenues for this payment requirefurther discussion. Page 4, Section F, "Program Required Agreements" of the "Regulation" document provide the details of the formula for recovering the assistance. A practical example follows: (NOTE: The following assumption was used in applying the formula to create an example of the return of interest reduction: $77,000 = Sale price $ 1,800 = original down payment $58,000 = remaining principal on a 60,000 mortgage, owed to first lien holder $12,000 = land cost the HRA deferred with second lien concept $ 4,620.= 6 percent realtor commission $ 1,536 = the interest reduction payments made for a family with a household income of $25,000, selling their home after four years (i.e., $6~4 per month (x) 24 months of HRA assistance) $ 2,000 = the property appreciation and reasonable return to the initial owner given an initial sales value of $75,000 and the sale price of $77,000 four years later). $77,000 sale price by family which initially purchased property - $ 1,800 original dawn payment -- $58,000 mortgage balance due lender - $12,000 land value. due HRA - $ 4,620 $~~0 balance remaining after deducting the above costs of $77,000 from the sale price To determine amount of interest subsidy to be repaid to HRA (see above definitions): $2,000 x $1536 ~,, 3~`0 = $ ~ o The $40 plus the $12,000 is the amount the HRA would receive when the initial family purchaser sold the home. The purpose of the formula is to return interest reduction assistance to the HRA, if warranted, but prevent placing the seller at a financial disadvantage such that the ownership of the unit results in a significant loss of financial resources. ~~ -9- /- First-time homebuyers of City of Minneapolis. affordable housing and the owner of 6216 Pillsbury in Richfield (an HRA developed affordable home) have encountered difficulty in selling their houses which have received subsidies. A financial loss can be experienced because realtor commissions, seller closing costs,. and interest buydawn repayments can quickly exceed the sale price of the home. The principal on the first `- mortgage and the payment for the deferred land cast are easily covered. However, original down payments and equity growth are lost to sales commissions and repayment of interest reduction assistance. The formula in the program regulations make it possible for the HRA to ensure that the purchaser will not be placed in a risky financial situation should a sale occur in the future. The HRA has two likely revenue sources for interest reduction assistance: 1) Tax increment revenues generated by the development project. This was proposed in March, 1985, when the R au ~iorized staff to "prepare documentation for the establishment of a tax increment interest reduction project and submit the documents to the HRA for its review". 2) The sale of assets held by the HRA and the investment of those assets to provide a revenue stream. The interest generate by the investment would be utilized as the revenue source for the interest reduction payments, an estimated $8,000 per year for 8 households. The assets being recommended-for disposal are the 6425 and 6429 Portland Avenue properties. They could be sold to the city for $182,783. Previously, the city requested the opportunity to purchase these properties. The HRA indicated a willingness to sell at same time in the future, if appropriate, at a cost of $182,783• The sale and investment should occur by the Spring, 1986, to provide revenues starting in the spring, 1987• The HRA would be committing revenues far eight years. Staff believes the funding source far the assistance should be the sale of the property to the city. (No. 2 above). The actual amount of the sale proceeds to be placed in a fund will be determined through negotiations with the lender, MHFA and the mortgage insurance company. Any proceeds not utilized for this program will be returned to the HRA Capital Fund. This fund purchased the property. Following eight years of interest reduction assistance, the principal amount of the trust fund would be returned to the Capital Fund too. -10- f /D To reduce the amount of interest reduction assistance required for the proposed two bedroom units (the units that would be marketed to two to four person households with the lowest-incomes because of family size),. staff is requesting Hennepin County Cregarding CDBG requirements) and MHFA (regarding mortgage financing) to allow the two bedroom units to be sold to families with incomes up to $27,200, regardless of `- household size. Staff is awaiting concurrance from bath agencies. ' Development Time Schedule Key dates include: August 19 HRA meeting to review housing proposal and approve interest reduction project plan and regulations. Augus t 30 Preliminary plans completed. Sept. 5 Preliminary plans reviewed with neighbors. Sept. 16 HRA meets to review preliminary plans. Sept. 24 Planning Commission review of preliminary plans, PUD rezoning, public. hearing. Oet. 7 Site clearance: 910 W. 66th St., • 901-03 Rae Drive, 7508 Colfax Oet. 11 Final plans completed and submitted far ~' review. Oct.. 14 City Council first reading of rezoning, based on preliminary plans. Oct. 21 HRA review of final plans and authorize entering into developers agreement and selling land to developer. Oct. 28 City Council second reading of rezoning, public hearing based on final plans. Dec. 2 Construction start. Contents of Developers Agreement The content of the agreement would include. but not be limited to: -final plans, specifications, amenities. -deadlines far performance; closings and completion dates -deed restrictions that apply to performance within the requirements of the developers agreement and are removable by completion certificate. -guarantees that site will be cleared by the HRA before provided to developer -curb, fire hydrant, driveway opening, and sewer line connections in the public right of way completed by the HRA in accordance with 1985/86 budget proposal. -recapture of a portion of CDBG funds that were used for land acquisition at 66th St. and Rae Drive. (i•.e., the second lien concept) -11- ~~ -developer buydawn mortgage commitment, and closing points responsibility. -certification that units have been sold to moderate income persons -authorizations by the HRA, City Council, and Planning Commission concerning items of relevance to each entity. Neighborhood Participation On August 15, 1985, staff met with two of the three neighbors directly adjacent to the b6th Street and Rae Drive property to discuss the George E. Branton Construction Co. proposal. One neighbor, Mr Robert Sjoquist was not able to attend. Mr. Edwin Burkhardt, 921 Rae Drive and Mr. James Howard, 915 Rae Drive had the opportunity to discuss the concept plans and provide input. Mayor John Hamilton, invited by Mr. Burkhardt, also attended the meeting to review same grading and retaining wall concerns of Mr. Burkhardt's. Both Mr. Howard and Mr. Burkhardt were pleased with the concept, felt that the developer had effectively met the requirements of the design guide and the concept plan, and appreciated that the rear elevation of the westerly units was designed to break up any massiveness of the units by jogging the roof lines and staggering the site locations. These neighbors have been invited to attend the August 19, 1985, HRA meeting. Once a preliminary plan is formulated, staff will review the plan with. the neighbors to receive their comments as indicated in the above schedule Conclusion It is recommended that the HRA adopt the attached resolution which authorizes: -That George E. Construction Co., be selected as the developer for the project. -A developers agreement to be negotiated. -A detailed preliminary development plan to be prepared and provided to the HRA for review based on the concept plan reviewed at the August 19th meeting. This plan would be .available at the September 16, 1985 meeting and would be the basis for the Planning Commission and City Council review and approval for rezoning to a "Planned Two Family Residential District" planned unit development (PUD) and replotting. -The "Housing Development Project Plan", "Interest Reduction Project Plan, and, the "Interest Reduction Program Regulations", substantially in the farm presented. -The initiation of negotiations with the city for the sale of 6425 and 6429 Portland at the appropriate time. Resp~cJt~ully sub~ti';tted Actifig Executive I~irectar HRA RESOLUTION N0. ~ ~~ Selection of Developer, 66th Street, Rae Drive and Colfax Avenue Housing WHEREAS, the Housing and Redevelopment Authority in and for the City of Richfield (HRA) has acquired the properties located at 910 and 1016 W. b6th Street, 901 and 903 Rae Drive, and 7508 Colfax Avenue; and WHEREAS, there is a shortage of decent, safe and sanitary housing affordable to low and moderate income persons;-and WHEREAS, these properties owned by the HRA if properly developed could help alleviate the shortage of decent, safe and sanitary housing affordable to low and moderate income persons; and WHEREAS, a qualified developer has been identified, George E. Branton Construction Company; and WHEREAS, a developers agreement must be negotiated and more detailed development plans formulated for review by the HRA,. Planning Commission and City Council; and WHEREAS, a housing development and interest reduction project plan and regulations far implementing the project plan have been formulated to ensure that the housing at the 66th Street and Rae Drive properties will be affordable to low and moderate income persons by reducing the effective interest rate an mortgage loans; and WHEREAS, the financial resource identified in the interest reduction plan and regulation for ensuring housing affordability is the interest earnings from the proceeds of sale of real estate currently owned by the HRA, 6425 and 6429 Portland Avenue South. NOW THEREFORE BE IT RESOLVED, by the Housing and Redevelopment Authority in and far the City of Richfield, Minnesota: 1) That George E. Branton Construction Ca., is selected as the developer to construct housing at g10 and 1016 W. 66th Street, 901 and 903 Rae Drive, and 7508 Colfax Avenue subject to the negotiation of a developers agreement and approval of that agreement by the HRA. 2) That staff is authorized to negotiate a developers agreement. 3) That the developer is directed to prepare a more detailed development plan, which staff will review and make available to the HRA, and Planning Commission. 4) That the HRA approves in substantially the form submitted herewith the following documents: %/~,3 -Housing Development Project Plan -Interest Reduction Projeet Plan, and, Interest Reduction Program Regulations. 5) That staff is authorized to initiate negotiations with • the City of Richfield for the sale of 6425 and 6429 Portland Avenue at the appropriate time since the investment of proceeds for the sale of these assets .will finance the Interest Reduction Program identified. `" above and subject to final approval by .the HRA, Passed by the. Housing and Redevelopment Authority of Richfield, Minnesota, this 19th day of August, 1985. Thomas E. Harms, Chairman ATTEST: Joan Helmberger, Secretary /~ ,~ ~ ~.; ~ ~ ~ ~ ~ ~ ~ ~~ ~ I; ~. . ` ~ ~ ~ ! ~ `a .' ~~ i ;~ ~ * ~ ~ >;~. ~~ •I ~ 1 ~ !~. t{ ~ ~ ,' ~ ; ,F. ~) ~: . ;~. - ,, . ~~ w `i is . Q ~ ,~ , ~i ~'~. ~ ~T 7 ~. ~ ~ ~ ~. 6~ ~ ~, ; C ~ ;.~,, ~ . ' '•r- ~, . ~ ~: y. VT ~vr~ ~~ ~v ~ X rA T ~, ~~\ ter' 75 m \ ~; =c .A'' m~ 1,`~ ~~ /-/.5 • • .f /-i~ -~ ,, .~ I 1 R n ," a 1 C ~' <- ;_ ~~ .. t r r c~ ~= -~ _~ ~C i t - `~ . ~- `~ ~, .:. '` : =' 31 - - w~..~__:.,..~~...._..:.. .~.__....:.~._.. __...Y_ r+aa,-.wr..-.. /-/~ ~_~ ~`i _,~ J~ /-/9 ! . _ ~ C ~. _r_ 7- f i i v ~;. r } I O ~- o - ~ ~ ,, s a : ~ r ~ ,c F -+ ~ - ~ i 0 j ~ s ~y ~ , G f ~ I ~ oe , O G .. - • -.. / ~ ~ - ~ ,y ` r - -- -- f - ---~ --_ ~ ~ ., .. . ~ _ _ ~ ~ ~ ' ~ ~ ~ • ~ ~ E _ ~ - ~ ~ ~ /~ ~ ~ ~ ~ ~ ' ~ j \/ Y ~. .. ~ ' ..1 f fi ~ ~ ~ f r~ ~ i ~ ~ e, t H ~ > '~ . ' 1 _ ~ I W _ t~~~ 0 ~ ~ ^ ' .....J ~ N_~~ L___ ~ j•~~ - i. ~ . 1 _J 1 '~ ,4~.., ~ z T -. ..,.~~, l I =_ ~ I~{III ~~{~ ;j p__ a4~t ~ ~ i i ! ~ ~ I ' I ~ -J- - ~ 5 Ci ~_ {Iii ' i,.i~ ~~ . ~' -~ F~~ ~ ,,' ! ~I {{ I ~~ 1, ~ , ~~ ~ ~~~ '~I ~ I ~ ~ ff ~ I~~,= is l1 ~'! ~t jl - ~ - I~~ a .-, ~ i I i~j~ ~ '•!I ICI) .'' ~~ ' ~i'._ J _ ,.-= - - ~ ~' --. . S .~ " ' n O' r ''=J r~i H H t~J d r H r 0 T_ (T~ L - > .r ~i L ICI - ~~T =a - ~ "~'a r''i ~ F_ •~ 3 /~~ 1 i f F t .- i .~ s 3 i it t 7 f j3 1 { ~J • /~Z~ HOUSING DEVELOPMENT PROJECT PLaN INTEREST REDUCTION PROJECT PLAN FOR THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR T8E CITY OF RICHFIELD, MINNESOTA August 9, 1985 Prepared by: LeFevere, Lefler, Rernedy, O'Brien & Drawz 2000 First Bank Place West Minneapolis, MN 55402 (6I2)333-0543 /~ • HOUSING DEVELOPMENT PROJECT PLP_N .INTEREST REDUCTION-PROJECT PLAN A. Statutory Authority The Housing and Redevelopment Authority in and for•the City of Richfield (the "Autho=ity") was established in accordance with the Municipal Housing and Redevelopment Authority Act, Minn.. Stat. Section 462.411, et. s_eq. (the "Housing Act"), a~cn ~~is authorized by the City. of Richfield (the "City") to undertake projects thereunder. - H. Statement of Public Purpose The Authority has determined that there is a need to provide housing opportunities for. persons of Iow to moderate income, as defined by the. U.S. Department of Housing and Urban Development (HUD), the Minnesota. Housing Finance Agency (MHFA), or by the Authority pursuant to Section 462.445, Subdivision I(8) of the Housing Act. The Authority finds that property exists in the City which would provide an area suitable for~the construction of decent, safe and sanitary .housing affordable to-low and moderate income persons. It is further found and declared that areas exist which- are susceptible of providing persons of low and moderate income with home owne=ship opportunities, with appropriate~govern- mental subsidies and assistance. In order to alleviate the housing shortage; in order to foster development and use of vacant, underutilized, open or undeveloped real property; in order to provide low and moderate income persons with home ownership opportunities; and in order to insure the sound growth, development and financial stability of the city there is a need .for the Authority to exercise the powers granted by the Housing Act. The exercise of said powers are hereby declared to be public uses and purposes for which private: property may be acquired, public money spent, and other powers exercised. C. Project Description The project to be undertaken by the Authority is a housing development project pursuant to Section 462.422, Subdivision 14 of the Housing Act.. The project is also an interest reduction Program (the Program) as described in Section 462.445, Subd. 10 of the Housing Act. Pursuant to the Program, the Authority intends to: a• 1a3 (a) pay in periodic payments or in a lump sum payment any or all of the interest on Loans made pursuant to chapter 462C; or (b) pay in periodic payments or in a lump sum payment any or all of the. interest on loans made by private lenders to purchasers of housing units. The project to be carried out by the Authority will involve removing structures from two parcels owned by the Authority. The benefit of the lowered cost at which the- Authority intends to convey the land will be passed through tc the unit purchasers who. will repay the subsidy at the time of unit resale or satisfaction of their mortgage. The develop- er will construct four two-family dwelling units (total of 8 units) on the site for sale. to persons of Low and moderate income. Mortgage money will be provided from proceeds of the sale of housing revenue bonds by MHFA through the. Municipal Participation .Home Martgage_Loan Program. Inter- est rates on the mortgages shall be lowered through. the application of funds available to the Authority. Pursuant to Section 462.445, Subds. 11 and I2, the Authority has promulgated.. regulations . pertaining. to eligibility for participation in the Program and shall require purchasers to enter into an agreement relating to resale of the .property. D. Project Location The project shall be located at the northwest intersection of 66th Street and Rae Drive. The legal descriptions of the parcels included within the project- are included in Exhib- it A, which is attached hereto. E. Public Actions to Implement the Project The following actions have been or will be undertaken by the City and the Authority in order to facilitate the project: I. The City will rezone the property to Planned Two Family Residential (PMR-1) district and will issue a condi- tional use permit for the project. 2. The Authority will adopt a Project Plan relating to the housing development project and interest reduction project. 3. The Authority will. pass the benefits~of lowered land costs through to the unit purchasers. 4. The City will approve the plat for the project. 2 /~~ 5. Covenants, Conditions.. and P.estrietions, Articles of =ncorporaticn and By-Laws of the homeowners' associa- tion will be approved by the City. 5. The Authority will enter into the necessary agreements with the City, the developer, M~iFA, the lender tTCF Mortgage Corporation) and other parties. F. Land Use The property- to be ? rcluded i.*~ the housing development ar~d interest rate. reduction project is zoomed single fa*nily residential and will be rezoned to Planned Two Family Residential. G. Review by Planning Commission Pursuant to Minn. Stat. Section 462..356, subdivision ?, tre Alarming concaissi.or. has or wi31 reviek• all aspects of the project; including acquisitior. of propertl, r_eplatting and. rezoning, and has or will report to the city council regard- ing the consistency of t~^.e project to •the City's ccmprehen-. slue plan. ----- H. Financing of the Interest Reductions Program . The developer will finance interest reduction payments for the first two years of the project. After the second anniversary date of the closing of each unit, the Authority will finance interest reduction payments through funds available to it. The Authority. intends to utilize interest earnings from the sale proceeds of real estate currently owned by the Authority. However., the source of funds for the .Authority`s participation in the Program may vary over the life of the Program.. • ~~ EXHIBIT A PARCEL 1 -Lot 1 Rae Addition according to the plat thereof located in the County of Hennepin and. State of Minnesota -All that part of Section 28, Township 28, Range 24 in the. County of Hennepin and State of Minnesota, described as follows, to wit:. Beginning at a point marked "Judicial Landmark" on the east and west quarter section line of said section distance 410 feet west measured along said line from the east quarter corner of said section 28, thence south at right angles to said east and west quarter section line 74.6 feet to a point on the original Military Reservation line, which point is 83.5 feet SEly measured along said reservation line_,from its intersection with the east and west quarter section line of said section said point being marked by a monument marked "Judicial Landmark" thence South 79 degrees .38 feet W 140.14 feet to point marked "Judicial Landmark" thence South 7 degrees 10 feet west. 115.44 feet to a point in the traveled road; thence north 71 degrees 32 feet west 405.09 feet to point of beginning of the tract hereby to be described; thence. continuing North 71 degrees 32 feet west a distance of 140.53 feet;. thence north 13 degrees east a distance of 165.9 feet; thence south 83 degrees 50 feet east. 140.9 feet; thence south 13 degrees west a distance of 190.1 feet to point of beginning. Parcel 2 -Lot.6 and 7 Rae. Addition according to the plat thereof on file or of record in the office of the Registrar of Titles in and for Hennepin County. • r~ /acv INTEREST REDUCTION PROGRAM REGULATIONS FOR TAE HOUSING AND-REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF RICHFIELD, .MINNESOTA August 9, 1985 Prepared by: LeFevere, Lefler, Rennedy, O'Brien & Drawz 2000 First Bank Place West Minneapolis, MN 55402 (5I2) 333-0543 /-a ? RICHFIELD HOIISING AND REDEVELOPMEI+IT AIITHORITY INTEREST REDIICTION PROGRAM REGiJLATIONS A. Statutory Auth~ orty The Richfield Housing and Redevelopment Authority (the ' :, "Authority") has determined that it is in the public inter- ' •est to undertake an interest reduction program (the "Pro- gram") in order to lower the effective interest rate on certain loans made available by the Minnesota Housing ' Finance Agency {the "MHFA") through its Municipal Participa- tion Home Mortgage Loan Program, and thereby assist in • providing affordable housing to persons and families of low 'and. moderate income. Pursuant to Minn. ~Stat. Section 462.445, Subd. 10, the Authority is authorized to implement an interest reduction Program. The Program i~s a means by which the Authority may reduce effective interest rates on Loans. made to finance the purchase of dwelling units in a development and assist in providing housing for persons of low and moderate income at prices within their means. _. __. .__ In developing the Program, the Authority has .considered, the availability and affordability of other goverzunental pro- grams and of private .market financing, and has determined that there is a need for additional affordable mortgage credit in the form of interest reductions to encourage the construction and enable .the purchase of housing units within the city. The Authority has determined that financing for the housing units is not otherwise available from private lenders upon terms and conditions which will be affordable to persons of low and moderate income. B. Definitions Assisted Property:' property the acquisition of which is financed wi`-th a loan, with respect to which the effective interest rate. is or wi13 be reduced by payments made pursu- ant to the Program. Authority: the Housing and Redevelopment Authority in and for the City of Richfield. City: the City of Richfield, Minnesota. Gross Income: Gross family income of-all intended residents. of t~ze Ass sted Property, includingzncome from aII sources and before taxes or withholdings, except for the following: i. the income of any person who will reside in the. ~~ home. who is under 18 years of age or is a full- 1 /-~ ~ time student and who is related by blood,~adoption or marriage to a resident income recipient. or his or her spouse; and 2. non-recurring income, as determined by the Program Administrator. Interest Reduction Payiaents: payments made by the Authority to reduce. the effective rate of interest on qualifying Mortgage Loans in the. amounts and at the times set forth in these regulations. MHFA: the Minnesota Housing Finance Agency. Mortgage Loan: a Mortgage Loan made with respect to the Assisted Property under the Municipal Participation Home Mortgage Loan Program. Munici al Partci anon Home Mort a e Loan Pro ram: the. special program by MHFA under its. 1985 Sing a Family Mort- gage Zoan Program. Origination Agreement: a mortgage origination and sale agreement between the~Authority, the Program Administrator and originators of mortgages (TCF Mortgage Corporation) under the Municipal Participation Home Mortgage .Loan Pro- gram, and accepted by the Trustee of the Municipal Par- ticipation Home Mortgage Loan Program. Program: the Authority's interest reduction Program. Program Administrator: the Program Administrator of the Municipal Participation Home Mortgage Loan Program pursuant to a program administration and servicing agreement between the Authority, the Program Administrator, and accepted by the Trustee of, the Municipal. Participation Home Mortgage Loan Program. Qualifying Mortgage Loans: mortgage loans which meet the requirements set forth in sections D, E, F, G and H of these regulations. Trustee: the Trustee selected by MHFA for administration of Mortgage Loans under the Municipal Participation Home Mortgage Loan Program. C. Maximum Amount and Duration of Assistance 1. After the second anniversary date of a .qualifying Mortgage Loan, the Authority will use funds available to it to make interest reduction payments to reduce the effective rate of interest to the mortgagors on quali- fying Mortgage Loans by the amount for which. the 2 /~5' mortgagor qualifies pursuant to section E of these regulations; 2. Interest reduction payments will not be made after the ._ time the .aggregate of principal, interest, taxes and insurance on the mortgage is equal to or less. than 28 - percent of the mortgagor's gross income; 3. Interest reduction payments will not be made after the time when title to the Assisted Property is transferred because. of sale or any other transaction,- but subse- quent purchasers will be eligible to qualify for participation in the Program; 4. Interest reduction payments .will not be made if the • Assisted Property ceases to be gwner-occupied, which shall include property which is leased for Less than .six months or longer than one year; 5. The-Authority shall annually re-evaluate aII mortgagors participating in 'the. Program to ensure continued qualification under the Authority's income limitations. D . Qualifying .Mortgage Loans ___._ _.._ Mortgage Loans which meet the. following requirements shall be eligible for assistance under the Programr 1. The Mortgage Loan must have been purchased by the Trustee selected by MHFA for the Municipal Participa- tion Home Mortgage Loan Program; and: 2. One hundred percent of the funds appropriated by the Authority for interest reduction payments under the Program in.any year must be used with respect to .loans made to persons or families with gross incomes qualify- . ing under the guidelines established pursuant to .• Section E of these Regulations. E. Qualifying Participants Participants in the Program shall qualify under either of the following criteria: 1. Gross a: families families families families families nnual income shall not exceed of not more than- two persons, of not more than three persons, of not mare than- four persons, of not more than five persons, any of not more than six persons; or $21,000 for $23,000 for $26, 250 . for $27,900 for 3 $29,550 for 3 / X30 2. Gross annual income shall. not exceed 80 percent. of MSFA's eligible .income or $27,200, regardless of family . size, as adjusted from time to time by the Authority to be consistent with HUD Section 8 program income guide- --- lines. Fifty percent of the units shall be reserved for persons - qualifying under. subsections 1 above and 50 percent for persons qualifying under subsection 2 above.. F. Program Required Agreements In order to obtain assistance under the Program an applicant must execute.. an agreement providing that upon .the sale or transfer of the Assi.sted.Property, the Authority shall be paid an amount equal to at least the sale price of the property,. less the downpayment, any payments of principal, other payments made to construct, acquire or improve the property and any outstanding liens or mortgages securing loans, advances, or goods and services provided for the construction,. acquisition or improvement of the property, less the .amount, if any, which.-the Authority .determines should be allowed for the benefited property.-owner as a return on the benefited. property owner's investment in the property. This amount shall be multiplied by a fraction, the numerator of which is the interest reduction payments made by the .Authority and the denominator of which is the total of the downpayment, all principal and interest pay- ments including any portion paid by the Authority, and other payments made to construct, acquire or improve the property.. Authorized improvement expenses are expenses, in a maximum amount of $3,000, paid or incurred in connection with an improvement.. to the ,Assisted Property of a sort which in- creases the market value of the home. Such improvements may include the addition. of a room, installation of a deck, the installation of a fireplace, addition of central air condi- tioning, finishing unfinished living space or any other improvements approved by the Authority. Prior to incurring any improvement expense, a mortgagor may seek a written opinion from the Authority regarding whether the expense is an authorized improvement expense. Expenses incurred to maintain the Assisted Property, such as the replacement or repair of any part thereof, do not constitute authorized improvement expenses. Opon the -sale or transfer of the Assisted. Property, the mortgagor must provide the Authority with receipts, or other proof satisfactory to the Authority, of any authorized improvement expenses. G. Pledged Savings Account In order to obtain assistance under the Program an applicant must also execute any. documents necessary to make the Mortgage Loan a pledged savings account mortgage loan. If 4 . ~ / ~3 / such Mort a e Loan meets all the re g g quirements of Sections D, E, G and H of these Regulations, the Authority will fund the pledged savings account with funds available to it. H. Secuxity The obligation to make the payment detailed in the program required agreement shall be secured by a lien against the Assisted Property... Such interest. in the property, at the cption of the Authority, may be subordinate to other inter- ests in the property, and .will be subordinate to the Mort- gage Loan made with respect to the Assisted Property under the. Municipal Participation Home Loan. Mortgage Program sponsored by MHFA. In all cases, an appraisal shall be used ; to establish the sale price. H. Source of Funds The Authority shall use funds-available. to it to finance interest reduction payments.. After the expiration of developer-financed intere t reduction payments, the Author- ity intends to finance its contributions by means of inter- est earned from the investment of funds received from the sale of ~ certain real' estate owned by the Authority. However, the source of funds used by the Authority may vary during the eight year period during which the Authority intends to participate in the Program. I. Reporting On or before January 2 of each year during which the Program is in existence, the Authority shall report to the Minnesota Department of Energy, Planning and Development a description of the Program established and a description of the recipi- ent~ of interest reduction assistance. 5