HRA 08/04/2011 - 6550pc"I'tl C
August 4, 2011
HRA Meeting
Regular Meeting Agenda
7.00 p.m.
Call to order
Roll call
Action Items
1. Approval of expenditures
2. Approval of June 2, 2011, Meeting Minutes
3. Election of Officers
4. Consideration of Resolution - Purchase and Sale of Property - Housing
Replacement Program
Informational Items
1. Home Improvement Demonstration Project Update
2. Housing Loan Program Update
Adjournment
H:\My Documents\HRA\2011 HRA Agenda\August -2011 Agenda outline.docHWy DocumentslHRA\2011 HRA AgendMugust-
2011 Agenda Outline.doc
CITY OF FRIDLEY
HOUSING AND REDEVELOPMENT AUTHORITY COMMISSION
JUNE 2, 2011
CALL TO ORDER:
Chairperson Commers called the HRA Meeting to order at 7:00 p.m.
ROLL CALL:.
MEMBERS PRESENT:
NONMEMBERS PRESENT:
ACTION ITEMS:
1. Approval of Expenditures
Larry Commers
William Holm
Stephen Eggert
John Meyer
Pat Gabel
Paul Bolin, HRA Assistant Executive Director
Becky Kiernan, Accountant
Jim Casserly, Development Consultant
MOTION by Commissioner Holm to approve the expenditures as presented. Seconded by
Commissioner Gabel.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY
2. Approval of May 9, 2011 Meeting Minutes
MOTION by Commissioner Eggert to approve the May 9, 2011 minutes as presented.
Seconded by Commissioner Meyer.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY
3. Public Hearing and Consideration of Resolution Authorizing Sale of 831 Mississippi
Street
MOTION by Commissioner Gabel to open the public hearing. Seconded by Commissioner
Holm.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY AND THE PUBLIC HEARING OPENED
AT 7:03 P.M.
Paul Bolin, HRA Assistant Executive Director, said that Statutes require the Authority hold a
public hearing authorizing sale of its property. Last month the Authority reviewed the proposed
purchase agreement for the home at 831 Mississippi Street. There has been one minor, tornado
related, change to the "deal" since last month ($500 towards landscaping to replace lost trees).
Mr. Bolin said that the current "deal" is $157,500 — less $5K in seller concessions and some
minor repairs, less $500 GC to replace trees lost in tornado which makes the bottom line
$152,000. Staff recommends the Authority approve the resolution approving the sale of 831
Mississippi Street in the amount of $152,000. Closing is set for 1:00 PM on Friday June 3.
MOTION by Commissioner Holm to close the public hearing. Seconded by Commissioner
Gabel.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY AND THE PUBLIC HEARING CLOSED
AT 7:07 P.M.
MOTION by Commissioner Gabel to authorize the sale of 831 Mississippi Street in the amount
of $152,000. Seconded by Commissioner Eggert.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY
4. Consideration of Amendment to Development Agreement — 6499 University Avenue NE
Paul Bolin, HRA Assistant Executive Director, said that Gladstone Commercial Corporation.
purchased 6499 University Avenue NW in 2008 for $10.5M. They were bound to a
development agreement originally created in 1984 with Target; which was amended in 2005 for
6499 Partners, LLC. Gladstone is now asking the Authority to amend the Development
Agreement and reduce the purchase price from $300K to $275K. They have not provided any
justified need for this price reduction.
Mr. Bolin said that the Development Agreement Terms state that Target or its successors are
required to purchase the property surrounding the building no later than April 2014, for $300K
and are required to pay $15,000 in annual rent for land. Target purchased a T -bond in HRH's
name and the rent is paid in full through 2014. The 1984 and 2005 agreements do not provide
for any rebate, reimbursement or reduction in land price.
Mr. Bolin said that because Gladstone has failed to demonstrate any dire financial need for a
reduced price and provisions in 1984 and 2005 Amendment are clear on the fact that there will
be no reduction in sales price for an early buyout, Staff recommends that the land not be sold for
less than the $300,000 the Authority has anticipated since 1984.
Commissioner Holm asked about the T -bond and if it had any cash value as of 2014 that would
be received.
Mr. Bolin answered yes, there is cash value but he did not recall the dollar value. HRA will get
the principal on that bond when it expires.
Commissioner Holm said that Gladstone thinks $275,000 is reasonable because they are paying
early but it represents a 3% per year discount. He does not think the Authority can buy anything
to generate 3% interest. He asked if there was anything the Authority could invest in to generate
a positive return.
Mr. Bolin said that investments would generate around ' /Z to 1 percent; nowhere near the 3% that
would be needed.
Commissioner Holm said there is not much of a discount HRA can offer but was something to
consider if they really want to resolve the issue. The other question is that there was a section of
B3 or some part of a sub parcel that had a potential of becoming a parking ramp. He asked what
happened to that plan and if HRA gave up that right and if Gladstone takes responsibility of
future construction of a parking ramp.
Mr. Bolin said that in 2005 amendments were done regarding a change that was made.
Originally the Authority had the right to construct a parking ramp on B3 but another group asked
HRA to give up that right.
Chairperson Commers said that it is mandatory requirement to buy in 2014, not an option. He
did not see reason to change anything.
Commissioner Meyer said it should be Gladstone's job to make a case, not HRA's to figure out
what the Authority can do for them. He was surprised they made any offer.
Jim Casserly, Development Consultant, said that when this was amended it was very clearly
stated that the 6499 University Avenue deemed to any prepaid rent owing on parcel B for the
remainder of the lease term, no further rent shall be required and no entitlement to rebate in
regard to the rent payment would be granted. If they opt to take the land earlier, HRA is entitled
to the treasury obligation. If HRA wants to sell earlier they can but would hold on to the
property until maturity. Maturity is a 30 year bond and it matures in 2014. There is really
nothing for the Authority to do, HRA has the title, nothing is owed and the rent is deemed
prepaid.
Chairperson Commers said that HRA gave up the right to build a parking ramp. The ramp was
not going to be necessary for the office building, so it is not needed.
Commissioner Eggert asked what would happen if they don't buy the property and pay the
$300,000 in 2014.
Mr. Bolin answered that they would not have access to their building.
MOTION by Commissioner Meyer to deny the request for Consideration of Amendment to the
Development Agreement — 6499 University Avenue NE. Seconded by Commissioner Gabel.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY
INFORMATIONAL ITEMS:
1. Home Improvement Demonstration Project Update
Paul Bolin, HRA Assistant Executive Director, said that the home on 831 Mississippi Street was
hit by the May 22"d tornado. He provided the following insurance premium updates:
League of MN Cities Insurance:
Property and Liability Insurance Premium: $132
Coverage: Property Damage: $190,000
Liability: $1,500,000
Deductible: $50K/occurrence; $100K aggregate
Private Insurance:
Property Insurance Premium: $1,000*
Coverage: Property Damage $140,000
Liability $ 0
Deductible: $1,000
* The policy would cover the basic perils of fire, wind, smoke, explosion,
vandalism, etc.. Claims for frozen water pipes, theft, weight of ice and snow
would not be covered. The policy would allow for the vacancy and the rehab
condition.
Mr. Bolin asked what the comfort level was of the Authority to carry private insurance on future
homes. The premium is $1,000 and the chance of a tornado hitting another one of our houses is
rare. Staff does not have a strong recommendation either way and it is unlikely another one of
HRA's properties would be hit by a natural disaster.
Chairperson Commers noted that another issue is that the HRA currently owns a considerable
amount of property. He is concerned about the liability. If someone is walking and trips and
falls on HRA property they can make a claim and HRA would have a large deductible. This
would create additional exposure. He asked if a policy could be purchased to cover the gap from
$1,000450,000. If someone were hurt on the property they could sue; HRA needs to be
covered.
Commissioner Meyer agreed that it would be worthwhile to check out the cost of gap insurance.
Commissioner Eggert asked if staff had a breakout of any claims that have been made or if
HRA had experienced any claims.
Chairperson Commers said that there have only been one or two claims. One situation he
recalled that the city got sued and not the HRA. HRA has not had many claims but also has
never owned as much property, vacant land and parking as they do now.
Commissioner Holm was more concerned with the liability than the property damage. HRA
owns a number of properties that do not have damage potential.
Jim Casserly, Development Consultant, said that he is working with Paul on getting some
quotes. Trying to get property coverage on a vacant dwelling is almost impossible, that is why
the premium is so high. Only a small number of companies will work with HRA for this type of
coverage.
Commissioner Eggert thought it would be helpful to find out what HRA currently has with the
city for coverage and how that program operates within the city before seeking out more
insurance. Staff could spend time pursuing something that isn't available or find out what we
have is sufficient.
Chairperson Commers said that originally HRA had their own insurance; he does not
remember the discussion of being combined with the city for insurance. In the past HRA has not
owned homes, they would purchase homes and tear them down; there has always been liability
exposure. This is the first time he is aware of the $50,000 deductible and has heard details of the
entire coverage.
Commissioner Gabel did not know what type of direction to give staff. Staff will have to do
some research and break the cost down.
Mr. Bolin said that he would gather information of any claims history, get bid on gap insurance
and provide more information to the Authority on the leagues coverage. He will bring this
information to the next meeting.
2. Scattered Site Housing Replacement Program Update
Paul Bolin, HRA Assistant Executive Director, reviewed the open house schedule for the home
on 4757 2 "a Street:
Finished Open Houses:
Sunday June 5th —11AM — 4PM
Wednesday June 8th — 4:30 -6:30 PM
Wednesday June 15th & 22 "d
Other Dates and Times to be determined
Mr. Bolin said that this home is not complete yet but should be by June 15. The bank is out of
town and is requiring more documents. Resolutions may be needed to address these issues. He
will gather information and present next month if the documentation is ready. A closing date of
June 8th has been set for the property on 381 Ironton Street. This property was purchased for
$50,000 and will be demolished.
3. Housing Loan Program Update
Paul Bolin, HRA Assistant Executive Director, said that in May one loan was closed which
makes a total of four loans year to date. There were no remodeling advisor visits so the total
remains at three year to date. He noted that the reporting dates changed to the 15 of each month.
Chairperson Commers asked for an update on the damage from the tornado.
Mr. Bolin said that most damage happened on the John Allen property, the new building on
Main Street. Windows and doors blew out and part of the roof came off. Other areas damaged
included the Murphy Warehouse who had number semi trailers blown over; rail cars were
knocked over too. Most of the damage came from trees that were knocked over and a few roofs
were damaged.
Commissioner Meyer asked what the policy is to have trees removed.
Mr. Bolin said that brush can be dropped off at the Columbia Arena. There is a map on the
website as to what locations of damaged areas. If residents cut up their trees and put it out by
their curb the city will pick up the trees and brush; there is no charge for this service. Columbia
Arena has map of the damaged areas; if you are not in that area and try to drop off trees or brush
you will be turned away.
ADJOURNMENT:
MOTION by Commissioner Gabel to adjourn. Seconded by Commissioner Eggert.
UPON VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED
THE MOTION CARRIED UNANIMOUSLY AND THE MEETING ADJOURNED AT
8:15 P.M.
Respectfully Submitted,
Krista Monsrud, Recording Secretary
Fridley Housing and
Redevelopment Authority
Action Item
DATE: June 24, 2011
TO: William W. Burns, HRA Executive Directo4v
FROM: Paul Bolin, Assistant HRA Director
SUBJECT: Election of Officers
Article V, Section 3 of the Authority's by -laws requires the Board of Commissioners to
annually elect a Chair and Vice Chair. Below is a list of the commissioners and the
length of their current appointments.
Commissioner End of Term
Bill Holm June 2012
Pat Gabel (Vice Chair) June 2013
Larry Commers (Chair) June 2014
Stephen Eggert June 2015
John Meyer June 2016
Recommendation
Staff recommends that the Authority elect a Chair and Vice Chair as required by the
Authority's by -laws to serve through June 2012.
ACTION ITEM
ri HRA MEETING OF AUGUST 40 2011
CITY OF
FRIDLEY
uate: July 11,LU11
To: William Bums, City Manager
From: Paul Bolin, Asst. Executive HRA Director
Subject: . Acquisition & Sale Procedures Resolution - Housing Replacement Program
Future Purchases
At the past few Authority meetings, staff has shared the difficulty in meeting the demands some
of the larger out of state banks place on purchase agreements. Each bank seems to want different
information, from proving the Authority has the financial ability to purchase, to obtaining proof
that staff is authorized to negotiate for the Authority. Some banks are satisfied with meeting
minutes or a letter from Dr. Burns. Other banks question staffs authority to even have
preliminary purchase discussions on behalf of the Authority.
During the June meeting, the Authority authorized staff to develop a resolution that meets the
needs of the banks, yet is in line with the HRA Bylaws and MN Statutes. Attached to this
memorandum is a resolution that clearly gives Authority staff a document that will satisfy any of
the concerns lenders have had to date. In a nutshell, the memorandum more clearly states what is
already provided for in the HRA By -Laws - that the Chair, Vice - Chair, Executive Director and
the Assistant Executive Director may sign purchase and/or sale documents on behalf of the
Authority.
Recommendation:
In order to streamline our acquisition of properties for the housing replacement program, Staff
recommends approval of the attached resolution.
HRP Acquisition Vpdate:
Since the June meeting, staff was able to negotiate the purchase of the foreclosed home located at
465 Mississippi Street for $56,500. While the home looks nice on the outside, the inside has
been completely destroyed. In addition to large portions of the floor joists being cut out, every
pipe in the home has been broken and all wiring removed. The home is not a candidate for
rehabilitation as it has been structurally compromised. The home sits on a rather large lot, 100' x
200' and will provide a tree covered backyard to a future owner. A closing will happen in early
August.
HRA RESOLUTION NO.
A RESOLUTION DELEGATING CERTAIN POWERS
REGARDING THE ACQUISITION AND SALE OF
RESIDENTIAL PROPERTY BY THE HOUSING AND
REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF
FRIDLEY, MINNESOTA.
BE IT RESOLVED by the Board of Commissioners (the "Commissioners ") of the Housing and
Redevelopment Authority in and for the City of Fridley, Minnesota (the "Authority ") as follows:
Section 1. Recitals.
1.01. It has been proposed that the Authority delegate to each of the Chairman, Vice
Chairman, the Executive Director and the Assistant Executive Director, the power to
acquire and sell certain residential property (the "Property ") in furtherance of the Plan
described below.
Section 2. Findings.
2.01. The Authority hereby finds that it has approved and adopted a development program
known as the Modified Redevelopment Plan for its Redevelopment Project No. 1 (the
"Redevelopment Program ") pursuant to Minnesota Statutes, Section 469.001 et seq.
2.02. The Authority hereby finds that it has approved and adopted a Housing Replacement
District Plan (the "Plan ") and created Housing Replacement District No. 1, pursuant to
and in accordance with Laws of Minnesota 1995, Chapter 264, Article 5, Sections 44
through 47; Laws of Minnesota 1996, chapter 471, article 7, section 22; Laws of
Minnesota 1997, chapter 231, article 10, section 13; Laws of Minnesota 2002, chapter
377, article 7, section 6; Laws of Minnesota 2008, chapter 154, article 9, section 19,
and Laws of Minnesota 2010, Chapter 216, Section 42 (collectively "The Act ").
2.03. The Authority hereby finds that to implement the Plan, it is necessary to move
expeditiously and efficiently in the acquisition and sale of Property for the Plan.
2.04. The Authority hereby finds that the acquisition and sale of Property promotes the
objectives as outlined in its Redevelopment Program and the Plan.
2.05 The Authority hereby finds that Minn. Stat. 469.012, Subd. 1 c provides that an authority
may delegate to one or more of its agents or employees the powers or duties it deems
proper.
Section 3. Delegation of Power.
3.01. The Chairman, the Vice Chairman, the Executive Director or the Assistant
Executive Director of the Authority are each hereby authorized to execute and
deliver any documents necessary to effect the acquisition and sale of the
Property.
PASSED AND ADOPTED BY THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND
FOR THE CITY OF FRIDLEY, MINNESOTA, THIS DAY OF ,
2011.
LAWRENCE R. COMMERS - CHAIRMAN
ATTEST:
WILLIAM W. BURNS - EXECUTIVE DIRECTOR
MMB: 4842- 5355 -6489, v. 1
INFORMATIONAL ITEM
ri HRA MEETING OF AUGUST 4, 2011
CnY OF
FRIDLEY
Date: July 20, 2011
To: William Burns, City Manager
From: Paul Bolin, Asst. Executive HRA Director
Subiect: Home Improvement Demonstration Proiect Update
4757 2nd Street
After a series of delays, I am happy to report that the home remodel will be completed on July
22nd. In early July it became apparent that our contractor would not be back to work anytime
soon. His company made some internal changes and we were given a staff person dedicated to
finishing our project.
Finished open houses are to be held on Saturday July 30th and Sunday July 31st, between noon
and 4PM. The open houses will be heavily promoted on the City website, a direct mailer from
Counselor Realty, and hand delivered flyers by Lennox Builders. Additionally, staff will hold
open houses on Wednesday evenings throughout the month of August between 4:30 and 6:30PM.
Staff will provide a number of before and after photos at the August 4th meeting.
Fridley HRA
Housing Program Summary
Cover Page
July 7, 2011 HRA Meeting
Report
Loan Application Summary
Loan Origination Report
Remodeling Advisor
Description
Loan application activity (e.g. mailed
out, in process, closed loans) for June
and year -to -date.
Loan originations for June and year -to-
date.
Shows the number of field appointments
scheduled and completed for the
Remodeling Advisor Services
administered by Center for Energy and
Environment.
H: \—Paul's Docun=ts\HRA\HRA Agenda Items\201 I Vuly 7, 201 Mousing Program CoverJuly.doc
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Fridley HRA
6/15/2011
Loan Originations
Programs
# of Projects % of Total
This Month
0%
Previous Months
0%
Since 1/1 /2011
HRA Loans (Incl. CFUF Discount loans)
$
0%
$
10,165.00
$
10,165.00
Leveraged Loans
$
Room addition
$
25,437.00
$
25,437.00
_ 0%
Exterior
Siding/Fascia /Soffit
- 0%
Total $
-
$
35,602.00
$
35,602.00
Funding Sources
_ 0%
This Month
_ 0%
Previous Months
- 0%
Since 1/1/2011
Fridley HRA inc Revolving & FRIDLAST
$
41,262.00
$
10,165.00
$
51,427.00
MHFA FUF /CFUF
$
-
$
10,100.00
$
10,100.00
Fridley Discount portion for CFUF
$
$
-
$
_
Met Council
$
$
-
$
_
CDBG /HOME
$
$
-
$
_
CEE Energy
$
$
15,337.00
$
15,337.00
Other
$
$
-
$
_
Total $
41,262.00
$
35,602.00
$
76,864.00
Types of Units Improved*
'most HH do more than one improvement so the total # will be equal or greater to the number of loans originated
This Month Previous Months Since 1/1 /2011
Single Family 2 4 6
Duplex
Tri -Plex
4 to 9 Units _
10 to 20 Units
20+ Units
Total 2 4 6
Types of Improvements
Interior
# of Projects % of Total
Bathroom remodel
0%
Kitchen remodel
0%
General plumbing
1 50%
Heating system
0%
Electrical system
0%
Basement finish
0%
Insulation
0%
Room addition
0%
Misc. interior projects
_ 0%
Foundation
_ 0%
Exterior
Siding/Fascia /Soffit
- 0%
Roofing
_ 0%
Windows /Doors
1 50%
Garage
_ 0%
Driveway /sidewalk
_ 0%
Landscaping
_ 0%
Misc. exterior projects
- 0%
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FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY
August 4, 2011
3r
1. HRA Property & Liability Insurance
Because of the questions that have arisen from the tornado damage to 831 Mississippi Street, and
the discussion of liability at the June meeting, staff has prepared a comprehensive list of "Frequently
Asked Questions" related to insurance. A memorandum and a number of exhibits are attached to
this non - agenda update.
Please feel free to e-mail with any further insurance questions you may have. I will get answers back
to the group.
2. Fridley TIF Guidebook
In 1991 the Authority prepared a guidebook explaining all of the TIF projects completed, up through
the creation of McGlynns TIF District #12. Becky Kiernan has done an excellent job of updating the
guidebook and a draft will be distributed on August 4th. The book will be bound such that, as new
districts are created, the information can be easily added.
3. Northstar Update
We received notice from Metro Transit, that they would like to eliminate 2 stops at the Fridley Station
as they are causing delays for the line. The following is an excerpt from a Metro Transit e-mail:
Because only one track serves the Fridley Station, trains are often significantly delayed as they meet Northstar
trains traveling in the opposite "reverse commute" direction. In order to alleviate delays for regular commuters
on these trains, two trips will no longer stop at the Fridley Station:
• The 5:51AM southbound trip will depart Big Lake two minutes later, at 5:53AM. It will arrive at the Elk
River, Anoka, and Coon Rapids stations two minutes later, skip the Fridley stop, and arrive at the
Target Field Station at the current 6.40AM scheduled time.
• The 5:27PM northbound trip will depart the Target Field Station at 5.27PM, skip the Fridley stop, and
arrive at the Coon Rapids, Anoka, Elk River and Big Lake stations two minutes earlier than the current
schedule.
Travel time for these two trips will be two minutes shorter. The downtown Minneapolis times will not change.
Recent checks show that the AM trip that would no longer serve Fridley has 5 boardings and 10 alightings. The
PM trip that would no longer stop at Fridley has 1 boarding and 6 alightings. These riders will need to move to
a trip arriving earlier or later.
Staff, of course, is opposed to any reduction in service. Staff is meeting with Metro Transit on July
25th for further discussion. An update will be provided at the August meeting.
4. Faulkner Development
The building is finished and residents are moving in. Faulkner has indicated that he could move to
Phase II as soon as September, if the Phase 1 building continues to fill with residents at its current
rate.
5. Trident Development (former Sandee's Site)
The Trident group is moving toward an August Rice Creek Watershed meeting for their project
approvals and they will be working with the Metropolitan Council on their SAC determination. The
developer indicates that they plan to break ground on their senior housing project (SW comer of Old
Central & Mississippi Street), early this fall.
COMMUNITY DEVELOPMENT
DEPARTMENT
HOUSING AND REDEVELOPMENT AUTHORITY
Informational Memorandum
DATE: July 18, 2011
TO: William W. Bums, Executive Director of HRA
FROM: Paul Bolin, Assistant Director of HRA
SUBJECT: HRA Insurance - FAQ's
During the Authority's June meeting, a discussion of storm damage to our 831
Mississippi remodel home led to a number of questions concerning insurance
coverage. The questions pertained to both property coverage and to liability
coverage. As insurance questions do come up from time to time, I thought it
would be worthwhile to provide a comprehensive guide to the Authority's property
and liability coverage through a list of "frequently asked questions" (FAA's) and
handouts from the League of MN Cities.
Is the HRA covered by the City's insurance?
The Contract for Services Agreement between the City and Authority specifically
states, "It shall be the responsibility of the City to ensure that any insurance
policies and Workers Compensation policies provide coverage for the
professional and clerical staff and commissioners when doing work for the
Authority'.
The Authority is covered by an endorsement to the City's policy. The Authority is
specifically listed on page 2 of the Municipal Liability Declaration (Exhibit A).
PROPERTY INSURANCE:
Exhibit B, attached, provides specific detail on the property coverage limits
provided through the League of MN Cities Insurance Trust. Following is a
summary of the Property insurance carried by the Authority. This coverage
applies to all homes, vacant parcels, and the University Avenue fence.
Coverage:
Property Damage $190,000
Liability $1,500,000
Deductible: $50K/occurrence ; $100K aggregate
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During the June meeting there was some discussion on purchasing additional
and /or private insurance on our remodel homes to avoid such a high deductible.
Staff believes that adding coverage to lower the deductible does not make
financial sense. It is not often that the Authority will be holding parcels, not
intended for demolition, and a small chance that those properties will be
damaged in a storm.
In the case of 831 Mississippi, I do have good news to report. Of the roughly
$18,000 spent to repair tornado damage, FEMA has agreed to reimburse us for
75% of our costs. We also have applications in to the State and expect
somewhere between 15% and 25% of our total costs to be reimbursed by them,
making the Authority whole (or very close).
Have there been other insurance claims made?
Since 2005, there have been 3 other claims totaling $14,279. All three claims
were for vehicles hitting the University Avenue fence. In one instance, the
vehicle owners insurance paid for the repairs. In the other two instances, the
drivers were uninsured, charged in court and ordered to pay restitution.
AUTHORITY & COMMISIONER LIABILITY INSURANCE:
Do we have an indemnity provision in our By -Laws?
Not in the by -laws, but rather in the Contract for Services between the Authority
and the City. When the contract was reviewed and updated in February of 2005
the following was added: "The City will indemnify the Commissioners for losses in
excess of the insurance coverage if they are incurred within the scope and
course of their work. This indemnification shall not be extended to acts of
malfeasance, willful neglect or bad faith."
Is the HRA protected by the government immunity privilege after our
insurance limits are used up?
In short, yes. Exhibit C from the League of MN Cities' "Handbook For Minnesota
Cities" addresses the issue on pages 5 -7. Exhibit D further summarizes the
protections given to volunteers in their city sponsored roles. The purpose of the
immunity is to prevent fear of personal liability interfere with your ability to make
tough decisions in your performance as an Authority Commissioner.
What types of claims could individual HRA Commissioners have exposure
to that are not covered by the $500,000 municipal tort limits?
Claims that would not be covered by the tort limits, that could expose an
individual member, include civil rights suits and inverse condemnation claims
arising out of regulatory takings. The City and HRA have the resources to cover
a loss that is in excess of the municipal tort limits, provided the Commissioner(s)
were not acting outside of the scope of their duties, with malfeasance, willful
neglect of duty or bad faith. Exhibits C & E provide more detail on this topic.
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Is there an umbrella policy to protect us individually if a judgment against
the HRA and us would exceed $1,500,000?
Authority members are protected, provided they were working in their official
capacity and there was no malfeasance. The protection is not provided through
an umbrella policy, due to the high premium for that type of coverage. When
investigated a 5 years ago, the cost for the coverage would be $34,000 /year.
Rather than carry an umbrella policy, the City maintains a separate fund, with a
balance just over $1 M, to use in the event that a judgment were to exceed the
$1.5M.
What does the League's policy provide in terms of first dollar defense? In
the event of a lawsuit, does the Authority get attorney fee coverage from
the first dollar or do we have to exhaust our deductible before the League
pays legal fees? If they pay from the first dollar does that reduce the policy
limits of $1,500,000?
The League will start paying legal expenses upon receipt of a suit against the
City or HRA. According to the League of MN Cities staff.. "In all but one case,
first dollar defense is provided on claims OUTSIDE the policy limit for the
coverage affected by the claim. No cap on expenses. Exception is land use
claims. $1 million total aggregate limit for all land use claims in one policy term
and defense costs are INSIDE this limit."
The legal and other expenses needed to defend the case do not impact the
$1.5M total liability coverage limit. These legal expenses are "outside" the dollar
coverage liability limit and are covered by the League. Any expenses involved in
representing / defending the Authority in a claim are "outside" of our policy limit,
meaning they do not impact or lower our liability limit.
Conclusion:
I hope that the list of FAQ's and all of the exhibits answer any questions that
Commissioners may have related to insurance. If there are more questions,
please feel free to email them to me prior to the August 4th meeting and Staff will
find the answers.
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