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10-13-83 agendaHOUSING AND REDEVELOPMENT AUTHORITY Office of Executive Director HRA Letter No. 33 Agenda October 13, 1983 Housing and Redevelopment Authority Commissioners City of Richfield Dear Commissioners: Subject: Authorization to Execute a Contract With South Hennepin Vocational Technical School (Vo-Tech) for 1983/84 Project South Hennepin Vocational Technical Center (Vo-Tech) has. requested that. the HRA again participate with them in a housing project for .the school year 1983/84., This would. be the sixth project beteen the two organizations since 1977.. This letter will describe past actions taken by the HRA concerning this pro- gram, summarize the contract with Vo-Tech, and. request execution of the contract by the HRA. On August 15, 1983, the HRA authorized staff to proceed with developing a multi-year Vo-Tech project located at 920 and 1016 WEst 66th Street. It was proposed that three two-unit structures be rehabilitated by Vo-Tech .over the next three years. On Septem- ber 19, 1983, the HRA authorized the acquisition of 920 West 66th Street from Hennepin County. The total acquisition cost was $52,400. The County and City each received $26,200. On October 10, 19$3, the city council authorized the acceptance of the $26,200. The Vo-Tech staff has evaluated the structure at 920 West 66th Street for rehabilitation into a two-unit structure. While initi- ally planning another rehabilitation project, it has now been de- termined that because of incompatible joist construction and the extensive demolition necessary-for rehabilitation, reuse of the structure is impractical. P revious Vo-Tech projects have, utilized nearly all of the original framing members of a structure. It is estimated that less than 50°s of the framing from this structure can be re-utilized. By removing the existing structure and constructing a totally new building, a net amount of approximately $5,000 may be saved. The existing structure can be sold at a public bid and removed from the property. Vo-Tech would then construct two new units in one building. Public bids would be solicited for removal of the structure. The highest bidder would be requested to remove it by November 14, 1983 so that the Vo-Tech project .would not be delayed. The revenue received from the sale of the house would be combined with other program .funds and used for future housing projects. HRA Letter No. 33 -2- The elevation and site plan of~the proposed structure is attached. Each unit will contain three bedrooms and two bathrooms. As with the :previous=Vo-Tech project on. Queen Avenue, this design incorporates super-insulation techniques in both units. This duplex structure has also been designed so that it can be incor- porated into the larger development plan originally proposed for 920 and 1016 West 66th Street. The structure and individual units were designed to be attractive to family purchasers. Included are interior and. exterior design features found in private market con- struction, such as: -split entry/split level design -vaulted. ceilings , -private bedroom spaces -full bathroom on each level. -private yard space -storage space -one car. garage and one outside parking space per ;.unit .. -screening of yard space between--units and adjacent to 66th Street Each three-bedroom unit will be sold to a family of three to six members having a moderate income (as determined by Section 8 income limits, between $22,500 and $28,450). Although the methods for selling the uni s have not yet been determined specifically, it is anticipated that a mortgage commitment through the Minnesota Housing Finance Agency reduced interest rate mortgage program can be secured. Since the units must be sold to pay the Vo-Tech contract, __ staff requests that the HRA consider a market rate sale if no other alternative exists. This is suggested because if the units are not sold to moderate income families,. it will still be necessary to return CDBG funds. to the appropriate program-fund. However, this has not been a.problem in completing .previous projects, and it is expected that the sale will be made to a moderate income family . The amount of the Vo-Tech contract for constructing two three- bedroom units is not 'to exceed $93,788, or $46,894 per unit. Major elements of the contract include: -A maximum cost of $93,788 for all-work performed under the direction of Vo-Tech a»d the HRA paying Vo-Tech after the property is sold, or by August 31, 1984; -A work completion deadline on or before July 1, 1984; -Supervision of labor and insurance coverage to be the responsibility of Vo-Tech; -A provision requiring Vo-Tech to be responsible for a one-year warranty for defects caused by faulty workman- ship or defective materials, a two-year warranty on in- stallation of plumbing, electrical, heating and cooling systems, and a ten-year warranty on structural defects. (This warranty :is required by state law) The Vo-Tech Board of Directors will review this.contr:act on November 10, 1983. The planning commission will be reviewing a special use permit request at its October 25, 1983 meeting,. and the city council will act on the specialuse permit at the November 14, 1983 meeting. A special use permit is necessary for a duplex structure. St is recommended that the HRA adopt the attached resolution authorizing the execution of the Vo-Tech contract by the Chairman and Executive Director for the project as described, contingent upon Vo-Tech approval of the. contract and city council approval of the special use permit. The resolution also permits staff to solicit bids and sell the existing structure at 920 West 66th Street through a public bidding process. pectful4y/,~ty~5~fitted , Rohn G. rt fight City Ma ger JGC/ej a r HRA RESOLUTION NO. RESOLUTION AUTHORIZING THE EXECUTION OF A CONTRACT WITH VOCATIONAL-TECHNICAL CENTER. WHEREAS, the Housing and Redevelopment Authority of Richfield (HRA) cooperates with the South Hennepin Vocational-Technical Center (Vo-Tech) to produce housing units for moderate income families; and WHEREAS, the HRA acquired the real property at 920 West 66th Street, legally described as: Lot 8, Rae Addition, Hennepin County; and .WHEREAS, the existing structure located at 920 West 66th Street has been found to be impractical for reYiabiltation purposes; and WHEREAS, a public bidding process is necessary to sell the existing house to the highest bidder sa that new construction can occur; and WHEREAS, the contract costs for construction of a new duplex structure will not exceed $ 93,788 and WHEREAS, a method of financing is to be determined that will continue to provide homes to moderate income families. NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelop- ment Authority of Richfield, Minnesota: 1. That the HRA Chairman and Executive Director are authorized to enter into a contract with Vo-Tech for an amount not to exceed $ 93,788 , 2. That the HRA staff is directed to continue exploring financing techniques that will enable the completed home to be purchased by a moderate income family; and 3. That the sale and removal of the existing .structure at 920 West 66th Street from the property is authorized. Passed by the Housing and Redevelopment Authority of Richfield, Minnesota this 17th day of October, 1983. ATTEST: Thomas E. Harms, Chairman Joan Helmberger, Secretary q ~D w ' b~~~~ __. ~~~x ~~~~ j ~I i, ,`~ .'•,I` ;}:: F:~ ~' ~4Yv': '~~ WEST ~'L. ~ Yd `f d IV -- ~ o ~Tf F L.wo'i-~ o ~ ~ . HOUSING AND REDEVELOP MENT AUTHORITY Off-ice of Executive Director HRA Letter No. 32 Agenda October 13, 1983 Housing and Redevelopment. Authority Commissioners. City of Richfield Dear Commissioners: Subject: Considerations-Relating to Preparing an Appli- cation for Authority to Issue Housing Mortgage Revenue Bonds Duzing~the last quarter of 1982, the city council and the HRA considered applying for authority to issue mortgage revenue bonds. This authority, which must be secured from the Minnesota Housing Finance Agency (MHFA), would provide the financing source for a citywide program that offers qualifying first-time home- buyers below market interest rate mortgages to purchase afford- able existing homes. Last year,-the HRA declined to provide necessary funds to support this program, determining that its limited financial resources were needed to pursue specif is projects having a higher priority. Another project, to which the HRA has already committed approximately $178,000-for acquisition and planning purposes, is developing affordable family housing w~thin the Portland Avenue Development Area (PADA) at Legion Lake. Secur- ing authority to issue mortgage revenue bonds for this project would finance affordable ownership or rental opportunities for moderate income families in 1984 if appropriate actions are taken now, by participating in the annual MHFA application process for bonding authority. This letter requests the HRA to initiate the process for .securing authority from MHFA to issue mortgage revenue bonds. Be- fore the end of 1983, the process will also involve: the city council; interested citizens; the city financial consultant, Even- son-Dodge; a bond underwriter, Dain-Bosworth; and the City/HRA legal counsel, who also serve as bond counsel. The Metropolitan Council and MHFA have an advisory and review role relating to sub- mitting a bond plan, bond program, and an application for bonding authority. The staff is in the process of finalizing a bond plan (a general statement of housing conditions, goals, and needs,) and bond program (a specific finance program for a project such as PADA) that would become part of an application. The HRA and City Council will be requested to consider the plan and program at re- quired public hearings and submit the plan and program to the Metropolitan Council for review prior to the January 3, 1984 submission deadline at MHFA. The Richfield "pan" and."program" will discuss: -2- -Housing needs, with supporting demographic data. -Local housing policies as outlined in Richfield's Comprehensive Plan a -Potential projects that could utilize this type of financing. -Lender participation. -The estimated number of loans and the estimated amounts and timing of the sale of revenue bonds required to finance loans, appropriate reserves, and costs of issuance. -Methods of monitoring a program to ensure it meets plan objectives. -Costs to the city, with costs of issuance being reimbursed from bond proceeds. Staff believes-the local contribution needed to make a bond issue feasible (known as "non-bond proceeds") could come from sources other than the. operating fund and reserves of the HRA and city. -How the program meets the needs of low and moderate income families. -The maximum loan amount, sales price, or monthly rental range for .the proposed units. The plan is a broad document that is applied to a variety of more specific programs that can be pursued over a number. of years. Hence, one plan, if adopted., serves- many programs. The first pro- gram would be .the proposed PADA project being submitted in this year's application. Future.. applications would require an appro- priate "program" but not a"`plan", since that plan would have been prepared earlier. The decision making steps for completing an applicat:i_on this year are provided in more detail on the attached schedule. The HRA will initially be asking the city council to schedule and hold a public hearing concerning the plan and program. It is proposed that an ordinance be given consideration which trans- fers the authority to issue mortgage revenue bonds for housing pur- poses from the City to the HRA, (copy of ordinance attached). Such action would make the financing process more manageable, and assembling documents necessary for a bond sale would also be simplified. Once the program and the plan are completed and tie public hearing requirement met, the plan and program are reviewed by .the. Metro- politan Council, as required by Minnesota Statute 462C. The HRA would. submit the application to MHFA for bonding authority provid- ing the ordinance is promptly adopted. The amount of bonding authority to be requested is in the process of being determined. Assistance is being provided by the architectural firm of Val Michelson Associates which is evaluating the design and cost feasi- bility for housing at PADA, and also by Dain Bosworth. It is expected the request for bonding authority will be perhaps only a quarter to a third of the maximum $10 million request permitted by an individual city. If MHFA receives requests for more than the $27.5 million in bonding authority available exclusively to cities, then the applications are ranked based on three criteria: HRA Letter No. 32 1. The proportion at least a six comes below 80 income limit, 2. The proportion median income, -3- of the proposed issue reserved for .month period for households with in- percent of the metropolitan area median ~r $25,280. reserved for families below 90% of the or $28,440. 3. The percentage of the proposed bond program that represents non-bond proceeds; i.e., a cash contribution. All applicants tend to use the same proportions for the first two criteria. As a result, the third criteria, that of the cash contribution, usually becomes the basis for the final ranking. In the program proposed in late 1982, the HRA was dis- turbed by having to contribute a minimum of 3-5% of the size of the bond issue and as much as 10% to be competitive in sec~~ring bonding. authority. .Since this was a program designed to finance the sale of existing homes, other contribution sources were few. However, with a new construction program, such as PADA, other likely sources for constributions increase. The following sources, suggested by our bond underwriter, could apply to the PADA project: Contribution from participating lenders, 2 percent (lender recovers this investment when buyer or seller pays "points" at loan closing). -Contribution from developer; 2-3 percent. -Contribution from HRA, $178,000; 3-6 percent depending on size of issue. This contribution has already been ex- pended for acquisition and planning.. -Contribution. based on the value of unacquired land, presently owned by-the city, with the ualue determined by appraisal; an estimated 2-4 percent depending on size of issue and the estimated market value of the land. Conservatively, staff expects a 7-8 percent contribution to be available from these sources.. The contribution does not have to be provided until after the city has been selected by MFHA and is actually preparing to issue bonds. However, the application must indicate the amounts, and the expected sources of such con- tributions. By February 1, 1984, MHFA will have reviewed each of the submitted proposals and selected successful-proposals. Assuming favorable consideration, Richfield would be authorized by MHFA to sell the housing revenue bonds through Dain-Bosworth anytime in 1984. Local lenders, who have agreed to participate in the program, in cooperation with the selected developer, originate and service insured mortgages with the bond proceeds being used to purchase these mortgages. In addition to the cash contribution issue, it is appropriate to address some of the other concerns the HRA may have regarding this process: HRA Letter No. 32 -4- -It appears that financial commitments are-being made for PADA when a develo er and development plan have not yet been considered by the HRA. The'i~RA-will be provided ample opportunity to make decisions on tha:s matter. The bonding authority only permits finan- cing once a developer and development plan are determined. A developer would be selected in the first half of 1984. -Mortgage revenue bonds for ownership housing cannot be issued after the Congressional "sunset" provisions take _place December 31, 1983. There is significant congressional support for cancelling the "sunset." However, even if it is not, bonding author- ity of some type will likely continue to be available. Since the annual MHFA application review process must be initiated before the end of .the year, the. HRA has little choice.. but to proceed. at this- time and assume favorable congressional action. (Also, the. authority to sell revenue bonds for multi-family rental: housing does not "sunset". If it is not possible to finance ownership housing, a de- cision could be made to finance rental housing.) (As with Industrial Development Revenue Bonds, the HRA. and the City are not at risk. with mortgage revenue bonds since they are not backed by the full faith and credit of the issuer. The bond holders-and mortgage insurers assume the risks, of default),. It is recommended that the HTA adopt the attached resolution which authorizes staff to proceed in preparing the bond plan and bond program and also requests the city council to adopt an ordin- ance authorizing the HRA to exercise the powers conferred upon cities by Minnesota Statutes, Chapter 462C. . Because of the time needed for an ordinance to become effective (assuming the council approves the ordinance), it will be necessary for the council to promptly initiate the process for processing the application (see attached schedule). Thus it is also recommended that the city council be requested to set the date of the public- hearing for considering the bond plan and program for November 28, 1983. The HRA and city council could meet concurrently on this date, to further discuss the matter. _ A thorough review of the entire process will be held with the HRA at the October 17, 1983 meeting. spectf~bmitted, ~ ~ ~ John G.~Car Wright City Manager JGC/eaj SCHEDULE FOR PADA HOUSING DEVELOPMENT October 17 HRA board meeting, .,evaluation of bond plan/ program concept, recommendation to City Council to schedule public hearing and first reading of ordinance conferring .upon HRA the powers of 462C. October 24 City Council meeting, consideration to authorize public hearing, first. reading of ordinance. October 26 Public-Hearing notice published. 30 day notice • required on plan, 15 day notice on program. November 7 ..• Preliminary plan/program submitted to the Metropolitan Council for required 45 day review. Changes made at request of City Council, HRA,. Metropolitan Council. November 14 City Council meeting, second reading of ordinance. November. 16 Ordinance published. November 28 Joint HRA Board and City Council meeting, scheduled public hearing .and review of bond plan/program. December 8 Metropolitan Council Community Development Committee review of bond plan/program. December 16 Ordinance effective. • December 22 Metropolitan Council review of bond plan/program. December 28 Application requesting share of bonding authority and bond plan/program submitted to MHFA for 30 day review period. January 26, 1984 February 1 February-June August November Fall, 1985 MHFA Board reviews bond program and distributes bonding authority that-must be utilized during 1984. MHFA Review Completed Developer Solicitation and Selection Bond Sale Construction Start Construction Completion and Unit Occupancy ~' °` CROSSTOWN HIWAY +--- -- -- E- --66th---- --~'F. -- _. .. .. __ RESOLUTION N0. A RESOLUTION RELATING TO HOUSING: REQUESTING THE RICHFIELD CITY COUNCIL TO AUTHORIZE THE HRA TO EXERCISE CERTAIN POWERS IN ITS BEHALF. BE IT RESOLVED BY THE HOUSING AND REDEVELOPMENT AUTHORITY OF,- THE CITY OF RICHFIELD, MINNESOTA, AS FOLLOWS: Section 1. This authority has investigated the facts and has found and determined that it is necessary and desirable for the achievement of the HRA's and the City's housing goals that programs of .housing finance be undertaken in the City under the authority of Minnesota Statutes, Chapter 462C (Act). -- Sec. 2. Section 46X.02, Subdivision 6 of the Act provides that the City may authorize the HRA to exercise on behalf of the City all of the powers conferred by Sections 46X.01 to 46X.08 of the Act. Sec. 3. It is found and determined that it is necessary and desirable to the sound management o£_ the HRA and the provision of housing in the City that the HRA be authorized to exercise the powers of the Act as described above. Sec.. 4. The HRA respectfully requests-the City Council of the City of Richfield to take appropriate steps as soon as convenient to authorize the HRA to exercise the authority granted by Sections 46X.01 to 46X.08 of the Act. . Chairman Attest: Executive Director ORDINANCE N0. AN ORDINANCE RELATING TO HOUSING: AUTHORIZING THE HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF RICHFIELD TO EXERCISE THE POWERS GRANTED BY MINNESOTA STATUTES, CHAPTER 462C ON BEHALF OF THE CITY. CITY OF RICHFIELD DOES ORDAIN; Section 1. Findings. Subdivision 1. The City of Richfield is authorized by Minnesota Statutes, Chapter 462C (the Act) to establish and administer programs for the financing of various housing projects in the City. Subd. 2. Section 46X.02, Subdivision 6 of the Act provides that the City may authorize the Housing and Redevelopment Authority of the City o.f Richfield (HRA) to exercise, on behalf of the City, all of the Bowers conferred on the City by Section 46X.01 to 46X.08 of the Act and the HRA has requested that the City grant such authority to it. Subd. 3. The City Council has investigated the facts and finds and determines that it is necessary and desirable to the sound management of the City .and the achievement of the City's housing goals to authorize the HRA to exercise the above listed powers. Sec. 2. Authorization. The HRA is hereby authorized to exercise on behalf of the City the powers conferred on. the City by Section 46X.01 to 46X.08 of the Act. Mayor . Attest: Clerk