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HRA 04/07/1994 - 29571CITY OF FRIDLEY �, HOIIBIN(3 & REDEVELOPMENT AIITHORITY MEETIN(�, APRIL 7, 1994 _________________,.__..____,._______,.__---___----------------______.. CALL TO ORDER• Vice-Chairperson Schnabel called the April 7, 1994, Housing & Redevelopment Authority minutes to order at 7:30 p.m. ROLL CALL• Members Present: Virginia Schnabel, John Meyer, Duane Prairie, Jim McFarland Members Absent: Larry Commers Others Present: Barbara Dacy, Community Development Director Grant Fernelius, Housing Coordinator Craig Ellestad, Accountant APPROVAL OF MARCH 17. 1994 HOUSING & REDEVELOPMENT AUTHORITY MINUTES• MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the March 17, 1994, Housing & Redevelopment Authority minutes as written. �"'� IIPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNAHEL - DECLAR�D THE MOTION CARRIED IINANIMOIISLY. 1. CONSIDER PROGRAM CHANGES TO SINGLE FAMILY REHAB PROGRAM: Mr. Fernelius stated that as indicated in the memo to William Burns dated March 30, 1994, on this subject, staff is proposing a number of changes to the housing rehab programs. Over the past month, staff has analyzed the program in order to see how the program can be improved. Mr. Fernelius stated staff experienced several problems with the program: 1. The application process took too long. A generic application form was used which requested basic information. From that application, staff screened out those people who did not qualify for the various programs. The problem with this process was that from the time the application window opened until it ended, there was a least a month lag during which people had to wait to find out if they were even eligible to be considered for any of the programs. Then, the actual application process, underwriting, and review period took place. n, HOIISINa & REDEVELOPMENT AIITHORITY MTQ.. APRIL 7. 1994 - PAQE 2 ^ 2. The actual prescreening process was not very helpful when _ it came to the loan and mortgage programs which are based more on a person's credit history and ability to pay; issues that the City really does not have the ability to examine. 3. The deferred loans (a small subsidy to be provided by the HRA in order to make the financing affordable) really were not necessary, particularly for the NII3FA Home Improvement Loan Program. The reason for that is that MHFA reduced the interest rates for that program about a percentage point, so it was a significant enough reduction where financing was already affordable. Additional HRA money really was not necessary. 4. The housing rehab inspections took too long and were not useful to the homeowners. The inspectors were not finding very significant violations. Most of the properties were in fairly good condition. Staff also had difficulty in finding competent and qualified inspectors to do the rehab inspections. Mr. Fernelius stated staff would like the HRA to approve the following changes: 1. Staff would like to take first-serve basis for the It is important to get t� programs into the lender underwriting and credit re prescreening and check ir that it takes a bank to e` applications on a first-come, : loan and mortgage programs. ie applications for these two as quickly as possible for view. Staff can do some basic icome eligibility, but beyond raluate the applications. For the grant program, staff would still like to use the prescreening process. Staff believes that financial need is a very important criteria, and they need to make sure the money is going to those people whose homes are in poor condition and who do not have the resources to make repairs. 2. Staff would like to change how the HRA funds are going to be used. The original idea behind using the HRA dollars was to provide �'gap financing". Staff went away from that approach for a couple of reasons, but has since decided that it is not such a bad idea given the fact that the MHFA interest rates have been reduced, and they would be using the dollars only in situations where they are needed. The maximum amount of assistance would increase slightly, from $2,200 to about $3,700. That amount would vary depending upon how much money a person wanted to borrow and could qualify for. Staff also �aants to stress that not everyone who comes in would receive HRA help. ,� HOIISING & REDEVELOPMENT AIITHORITY MTa.. APRIL 7. 199� - PAaE 3 3. Staff would like to eliminate the rehab inspections. As he explained earlier, the inspections took a great deal of �ime, and staff is concerned about the quality of inspections. Neither Fannie Mae nor MHFA requires an inspection for either of their loan programs. To create that extra requirement is a time factor that really plays into the whole application process and makes it much longer than it needs to be. A lot of this work is going to be covered under a building permit, so the building inspector will look at the work to make sure the work is � done to code. So, there is some control over how the work is done. Ms. Schnabel stated she believed it is wonderful how staff has stepped back and taken a look at the things that have worked and have not worked as well and staff's willingness to adjust. Mr. Meyer stated he is puzzled about a number of things. There seems to be a disparate series of problems, and he is trying to figure out how staff's suggested solutions fit into the problems. Regarding the first problem about the application process taking too long and requiring a significant wait for most people, how does the length of the process enter into this? Mr. Fernelius stated that in some cases, the wait was much longer than a month. Once the people got through the prescreening � process, they were notified that they were going to be selected for the program. Then an inspection had to take place. There was some time in order to get the inspection done. Then, the inspection report had to be filled out and sent back. Then, the homeowner had to get bids, and the bids had to include whatever items were cited on the inspection report. That whole process took several months. Part of the problem was, again, the inspection requirement, and part of the problem was that people had to fill out a separate credit application required by MHFA. Had that information been provided at the beginning, staff could have processed them more quickly. The whole prescreening process seemed to slow things down on the front end. A first-come, first-serve process would make the process move quicker. . Mr. Meyer stated that when this program was first set up, it was his wish that they would give everyone an equal chance by publicizing the program and having the applications open for a certain period of time. He believed this was a fairer way to compete for public monies. Then, the inspection process examined the property to determine the worthiness of the application. Mr. Meyer stated that it sounds like staff is recommending that they delete what he believes are two rather important safeguards for the public dollars...by giving people an equal chance to apply and to let people know at the very onset whether their particular � property is worthy of public monies. He was not so concerned about the efficiency of time as he was about some other things. �, � � HOIISING & REDEVELOPMENT AIITHORITY MTG.. APRIL 7. 1994 - PAGE 4 Mr. Meyer stated staff had stated that the City does not have the resources to do credit checks, and that did make sense. Mr. Prairie asked how the program was pub.licized. Mr. Fernelius stated they publicized the program through the Focus News, the City newsletter, and the cable access channel. The article in the City newsletter generated over 50% of the response rate. Mr. Fernelius stated that they will still be using the prescreening process for the block grant program. The other programs are stand- alone and operate throughout the state. Ms. Dacy stated that with the NII3FA and Fannie Mae programs, the people applying for monies are required to do code improvements, which is the City's objective as well. What they are seeing with loan programs is that the public sector is losing as compared to the private sector. The City�s objective is to get people to improve their housing. With the MHFA and Fannie Mae's programs, the real crux of whether or not these people are going to get a loan is their willingness to pay and their credit history. This is a different kind of applicant than the grant applicant. Instead of having them wait 30 days to get a determination from Mr. Fernelius, staff wants to speed up that turn-around time. As long as the checks are there for code improvements, staff believes they can accomplish the same thing. Mr. Meyer asked if staff is proposing to eliminate the initial rehab inspections. For example, if a person applies for money from a bank for code improvements and public monies are involved, how does the HRA or the City know what these code improvements are or if the improvements are necessary? Ms. Dacy stated the loan documents are conditioned upon those improvements being completed, and the applicant has to specify those improvements. The MHFA loan program has specific conditions as does the City's agreement with Fannie Mae. The City's way of making sure the code improvements are being completed properly is through the building permit process. Mr. Meyer stated the building permit inspections are after the fact, after the money has already been spent. �nTho decides whether the code improvements are necessary? Ms. Dacy stated that if someone is applying for a roof versus a furnace, the City is not in the business of deciding which comes first. Improvements related to the structural quality or major systems such as electrical, plumbing, and heating are permitted code improvements. Adding a jacuzzi, for example, is prohibited. As long as the applicant is proposing code improvements, that is consistent with the HRA's objective. 80II8INa & RED�PELOPMENT AIITHORITY MTa.. APRIL 7. 199� - PAaE 5 � Mr. Fernelius stated that on the loan application, the applicants _ must list what improvements they are going to make, provide copies of estimates from contractors and provide signed warranties. If the loan application meets the criteria of the program which would be code-type improvements, the applicant would be approved for the loan. The loan would be disbursed to the borrower. The applicant would come in for a building permit, and the work would begin. Mr. Meyer stated he is concerned cheaper money to put in a new plumbing system, none of which public monies. about the person who wants to get electrical system or a fancier are good enough reasons to use Ms. Schnabel stated the money that the HRA is giving is just the gap financing which is only used when necessary. The rest of the home improvement loans will go through MHFA or Fannie Mae, and she would think it is up to these agencies to regulate their programs. Ms . Dacy stated she did not think this money is a"gravy train" for someone who is trying to take advantage of the system. With the Fannie Mae program, the homeowner must have $15,000 worth of improvements. The larger issue is that they are trying to encourage people to upgrade and update their homes, because the City is competing with other suburbs that have aggressive programs. Mr. Meyer stated that history has proven that people spend a�lot � of time trying to beat the system, and it isn't just confined to housing. He believed it would behoove the HRA to have some kind of initial control as to whether the improvements are really necessary. Otherwise, they should just turn it all over to the private lenders. Ms. Dacy stated that, on the flip side, the HRA's extra 5� on the Fannie Mae program can help pay closing costs. It might be that extra little help that helps a person who really needs it. Mr. Meyer agreed, but stated they need to make sure that they are helping someone who really needs the help. He would like to see them stay with the pre-inspection where a knowledgeable inspector says the proposed improvements are legitimate or not legitimate. Ms. Dacy asked if Mr. Meyer would like an inspection after the person has applied for a loan as opposed to an inspector making a general inspection and identifying code deficiencies. Instead, the inspector would go through the building and make sure the improvements listed on the application are legitimate improvements. Mr. Meyer stated Ms. Dacy raised a good point, that the inspector look only at the improvements the homeowner has listed on the loan application. That way, they could still keep the initial inspection aspect. �� Mr. Meyer stated that regarding first-come, first-serve versus taking applications for a certain time period as was done this HOIIBINa & REDEVELOPMENT AIITHORITY MTa.. APRIL 7. 1994 - PAGE 6 r^� year, he preferred the latter. This was the first year for the program, and a first time program always attracts a lot of people. It is possible that with the second year, they could have lesser applicants and the total time involvement could be considerably less. He suggested that they stay with the original method for one more year. Mr. McFarland asked Mr. Fernelius how many people fell through the cracks during the waiting period. Mr. Fernelius stated he had 61 total applications for the housing rehab programs. Fourteen applications were denied. Eleven people withdrew from the program for a variety of reasons. Eighteen applications are in process, and 18 loans or grants have been approved. For the home improvement loan program, 26 people applied, three were denied, five withdrew, 14 are still in process, and four loans or grants have been approved. Mr. Prairie stated he had no strong feelings either way as far as changing the process or the inspections. Mr. McFarland stated the HRA has .committed $400, 000 for the housing rehab programs, and only $162,000 has been spent, so they are obviously not getting to the people they would like to get to, whether through the application process or whatever. Since they have a screening process that is going to limit the grants to those � people who are on the lower end of the spectrum, they will get to them sooner or later if the program goes long enough. He believed they have to have something in the program to make sure that the program is working. Ms. Dacy stated that at the next meeting, she � and Mr. Fernelius could discuss and make a recommendation on the issue of inspections on the loans and confirming the types of improvements that are listed on the applications. She feels strongly that on the loan program, they should try to get people in and out as soon as possible to get the momentum going in the neighborhoods and get people to take advantage of the low interest rates. Ms. Dacy stated the other issue with the Fannie Mae program is if a person is trying to buy a house, the prescreening process can really slow down the process. She stated the City wants to be more like the MHFA where they have programs running throughout the year. Ms. Dacy stated that if the HRA concurs with recommendations #1 and #2, with the exception of recommendation #3, staff will make a report on inspections at the May meeting. Staff would like to proceed with the other items. Mr. Meyer stated that if the prescreening process does not seem practical and it can be dropped successfully, he could see no problem with dropping the prescreening process. HOIISINa & REDEVELOPMENT AIITHORITY MTG.. APRIL 7. 199� - PAa$ 7 � Mr. Meyer stated he believed staff could try the first-come, first- _ serve basis if it seems a burden. But, they should be aware of any dissent from the residents. Ms. Schnabel stated that they can try it for one year; and if it is not successful, they cam always change back. MOTION by Mr. McFarland, seconded by Mr. Meyer, to approve staff's recommendations #1 and #2: 1. Take applications on a first-come, first-serve basis and eliminate prescreening. This action would reduce the application process significantly and make the programs more accessible to homeowners. Prescreening would, however, be used for selecting candidates for home improvement grants. 2. Provide deferred loans to applicants who cannot qualify for all of the necessary home improvement loan financing. Applicants who need "gap financing" could receive a deferred loan from the HRA for up to $3,750. The deferred loans would accrue interest at the same rate as the MHFA loan but would not have to be repaid until the house is sold. Staff is to report back on staff recommendation #3 regarding rehab � inspections for loan and mortgage programs. IIPON A VOICE VOTB, ALL VOTINf3 AYE, VICE-CHAIRPERSON BCHNABEL DECLARED THE MOTION CARRIED IINANIMOIISLY. 2. CONSIDER RESOLUTION NO. HRA 3- 1994 AUTHORIZING MHFA FIRST- TIME HOMEBUYER APPLICATION: Mr. Fernelius stated that the Minnesota Housing Finance Agency (NlHFA) will again be selling bonds for a first-time homebuyer program (Minnesota Cities Participation Program). Cities throughout the state can apply for up to $4 million. Last year, the City of Fridley applied for $2,249,000 and received $1,161,000. With that program, one loan was made and five loans are in process. Mr. Fernelius stated the City would like to again apply and request $1,500,000. Staff is recommending that the HRA approve a resolution authorizing staff to prepare an application for the 1994 Minnesota Cities Participation Program. MOTION by Mr. Prairie, seconded by Mr. McFarland, to approve Resolution No. HRA 3- 1994, "A Resolution Authorizing the Submission of an Application for the Minnesota Housing Finance Agency's 1994 Minnesota Cities Participation Program." � IIPON A VOICE VOTE, ALL VOTING AYE, VICE-CBAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED IINANIMOIIBLY. HOIIBING & REDEVELOPMENT AIITHORITY MTa.. APRIL 7, 1994 - PAaE 8 ^ 3. CONSIDER RESOLUTION NO. HRA 4- 1994 AUTHORIZING 1994 HOME APPLICATION• Mr. Fernelius stated this is a good opportunity for the City of Fridley to apply for HOME funds provided by HUD and allocated to Anoka County. Last year, the City received $70,000 in HOME funds which were used for the home improvement grant program. Staff recommends they do the same this year. A match of $17,500 is required of the HRA, so the total funds that would be available would be $87,500. Mr. Fernelius stated these funds have to be targeted to low income homeowners within a specific neighborhood. Staff has identified two target neighborhoods based on census data for funding. At a minimum, they could make at least eight grants within one of these two areas. This supplements the block grant funds the City also receives from the County. MOTION by Mr. Meyer, seconded by Mr. Prairie, to approve Resolution No. HRA 4- 1994, "A Resolution Authorizing the Submission of an Application to Anoka County for 1994 HOME Funds" and designate Area #2 as the neighborhood for these funds. IIPON A VOICE VOTE, ALL VOTING AYE� VICE-CHAIRPERSON SCBNABEL DECLARED THE MOTION CARRIED IINANIMOIISLY. i� 4. CLAIMS & EXPENSES: MOTION by Mr. Meyer, seconded by Mr. McFarland, to approve the check register (checks 25070-27084) except checks 25083 and 25084 which were voided. IIPON A VOICE VOTE, ALL VOTING AYE, VICE-CHAIRPERSON SCHNABEL DECLARED THE MOTION CARRIED IINANIMOIISLY. 5. CONTINUE DISCUSSION OF SOUTHWEST OUADRANT: Ms. Dacy stated the Council has directed staff to interview developers who have a lot of experience with the mixed use approach. She stated that at the May meeting, staff will give the HRA an update on the meetings with these developers. Ms. Dacy reviewed the three scenarios (townhomes-low density; mixed use-commercial & higher density; and high intensity development, possibly owner-occupied condominiums) which she had presented at the March meeting. She stated staff is not looking for any formal action from the HRA at this meeting. Mr. Prairie stated he would be interested in a tour of some of the developers' projects. ^ Mr. Prairie stated that the southwest quadrant is kind of a downtown area. Has anyone developed residential on a similar location? � HOIISINa & REDEVELOPMENT AIITHORITY MTa.. APRIL 7. 1994 - PAaB 9 Ms. Dacy stated the closest similar site is in New Brighton at lOth and 5th. She believed it is a viable site for residential. There are single family homes on Mississippi Street all the way from Highway 65 to the River; and even though this is a downtown area, a residential development is appropriate because it mixes in well with the adjacent land uses. Mr. Prairie and Mr. Meyer agreed that the George Sherman & Associates' brick apartment building with high density would fit well on this corner. Ms. Dacy stated the Council would like to pursue a Sherman-type building with condos or rental on top with some retail shops on the first floor. They like the idea of gearing the housing toward the empty nester/senior market. Mr. Prairie stated he would not be in favor of a general occupancy apartment building because of the problems associated with apartment buildings. Mr. Meyer stated he agreed. There seems to be more problems with apartment buildings. He would be more in favor of a owner-occupied development if it gives them the development they want and helps control the neighborhood. !� Mr. Prairie stated that whatever the development, it should be done well with a lot of landscaping. Mr. Meyer suggested a Shenaan-type building with partial retail on the corner with townhomes behind it that would fit in better with the existing residential neighborhood. Ms. Schnabel stated she did not think she would like the look of commercial that is visible from University and Mississippi. Mr. Prairie agreed. The access is difficult, and he would recommend very little retail. Mr. McFarland stated the retail would have to rely strictly on the building's residents. Ms. Schnabel stated that regarding the schematic submitted by the Bel Aire/LaNel Financial Group, she liked the way the mixed use buildings were angled on the property. Ms. Schnabel stated if staff finds an example of a mixed use building with retail on the first floor and condominiums above, it might be helpful for the HRA to visit the site. Ms. Schnabel stated that a residential development, whether ,-� townhomes or condominiums, on the southwest quadrant might spur ,' some development on the northeast corner. HOUSINa & REDEVELOPMENT AIITHORITY MTG.. APRIL 7. 1994 - PAdE 10 ^ 6. UPDATE ON LAKE POINTE MARKETING: Ms. Dacy stated she had met with their consultant, Merrill Busch, on Wednesday, April 6. The brochure and the inserts are almost done. The inserts include demographic and employment data, school district information, a site map of the Lake Pointe property, and a list of testimonial statements from Medtronic, Onan, FMC, and other key people in industry. Ms. Dacy stated that they will be displaying the brochure at the Commercial Real Estate Exhibition on Wednesday, April 13, 1994, from 3:30-7:30 p.m. If any of the HRA members could attend, she would arrange for tickets. Mr. Meyer stated he would like to attend. ADJOURNMENT• MOTIOAT by Mr. McFarland, seconded by Mr. Prairie, to adjourn the meeting. Upon a voice vote, all voting aye, Vice-Chairperson Schnabel declared the motion carried and the April 7, 1994, Housing & Redevelopment Authority meeting adjourned at 9:05 p.m. Res ectfully s bmitted, �"� Zd Ly e Saba Re ording Secretary ,�