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HRA 09/05/2002 - 00025095CITY OF FRIDLEY HOUSING & REDEVELOPMENT AUTHORITY MEETING SEPTEMBER 5, 2002 CALL TO ORDER: Chairperson Commers called the September 5, 2002, Housing and Redevelopment Authority meeting to order at 7:30 p.m. ROLL CALL: Members Present: Larry Commers, Virginia Schnabel, Pat Gabel, Jay Bajwa Members Absent: John Meyer Others Present: William Burns, Executive Director of the HRA Grant Fernelius, Assistant HRA Director Paul Eisenmenger, HRA Accountant Jon Haukaas, Public Works Director Clarissa Klug, Krass & Monroe PA Chris Losee, 1233 Hillwind Road George Vespa, 1249 Hillwind Road Don Ballinger, 1601 North Innsbruck Drive APPROVAL OF MINUTES: Ms. Schnabel stated that on page 7 of the August 1, 2002, minutes, the dollar amount of $8,420,000,000 should be corrected to $8,420,000. MOTION by Ms. Schnabel, seconded by Ms. Gabel, to approve the August 1, 2002, Housing and Redevelopment Authority meeting minutes as amended. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. CONSENTITEMS: CLAIMS AND EXPENSES: MOTION by Ms. Gabel, seconded by Ms. Schnabel, to approve the consent items as presented. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. ACTION ITEMS: 2. CONSIDER MODIFICATION TO HOME IMPROVEMENT LOAN PROGRAM POLICY ON EXTERIOR IMPROVEMENTS TO TOWN HOMES: Mr. Commers stated that last month, staff was directed to look into this matter further. Mr. Fernelius stated that the HRA's current policy prohibits loans to townhome condominium owners for making exterior repairs or improvements. These kinds of improvements are owned HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 2 in common by the association, but not the individual owner. In most cases, the association contracts for the work, and assesses the individual owners for their share of the cost. Each owner is responsible for finding his/her source of funds to pay for that portion. The policy is based on guidelines from the Minnesota Housing Finance Agency. There are no similar restrictions for single family detached homeowners. Mr. Fernelius stated that staff evaluated the policy and feels that a change is appropriate. The new policy would allow townhome and condominium owners to finance their share of common area improvements. This change would only affect HRA-funded loans and would not apply to any of the loans provided by the MHFA. Eligible repairs include things like siding, windows, doors, roofing, insulation, decks, front porches, driveways, and walkways. Borrowers would need to meet all other criteria of the program, such as income limits, credit requirements, and other underwriting criteria, etc. This action essentially expands the lists of eligible repairs as it relates to townhome owners. Currently, townhome and condominium owners can apply for financing, but only for interior repairs. The proposed change was prompted by a request from several owners living in Western Ridge Estates, an 8-unit development, who recently discovered that their townhomes had severe structural damage. Mr. Fernelius stated the HRA's attorney has made a few changes in the resolution included in the packet. Ms. Gabel asked why the MHFA does not include this for financing. Mr. Fernelius stated that he speculates it relates to the fact that the exterior portions of the units are owned by the association and not the individual owners. MHFA only finances work that is owned by the borrower. Ms. Gabel asked if they could make a loan to an individual for something that is owned in common. Mr. Fernelius stated that this is legal according to the HRA's attorney. Although the loan will be used to pay for common area improvements, it will be secured to the property through a separate mortgage. Mr. Commers asked which items on these lists are the obligation of the association versus obligation of the homeowner. Mr. Fernelius stated that everything on the list would be defined as common area improvement. Mr. Commers asked if driveways or sidewalks should be the obligation of the association, landscaping would be the obligation of the association, and not the homeowner. Mr. Fernelius stated that eventually those costs are passed back through to the individual owner. Staff believes that the list is fairly comprehensive and offers a broader latitude in helping townhome owners finance needed repairs. This new policy basically allows owners to finance their share of common area improvements. Mr. Commers asked if those are eligible improvements for loans to single family residents? Mr. Fernelius stated that they are. Mr. Commers asked why they changed walkways to private walks. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 3 Mr. Fernelius stated that it meant the same thing and the word "private" can be stricken. Staff is referring to truly private versus public costs. Mr. Commers stated that the last sentence is ambiguous stating that "improvements similar to those listed above". That introduces a term that can create a lot of dispute. That can be stricken unless there is a special reason for that as listed on page 2 and page 4. Ms. Klug, an attorney for Krass & Monroe P.A., stated that the original resolution in Section III talked about what will be executed and will include other inappropriate improvements at the discretion of the program administrator. The concern there was that it might be difficult to find out what is appropriate or inappropriate. Her office thought that putting this in the improvement section would be preferable to where it was. Mr. Commers is raising a good point, and the HRA might just want to stick with the straight list because that would be easy to implement as a practical matter. Ms. Schnabel asked if the townhome owners had to have equity in their townhomes equal to the amount of the loan they would be applying for? If the repair goes beyond $30,000, they would have to fill in that gap with another loan from another institution or something. Mr. Fernelius stated they did. They would have to fill in that gap with another loan. Ms. Schnabel asked if the accrued balance in the association reserve account would have to be used first before they would apply for a loan? Mr. Fernelius stated that the association would most likely use the reserve funds first, then assess the remaining balance against the owners. In the case of Western Ridge, the association only had a small amount of funds in reserve and the bulk of the cost had to be paid out-of-pocket by the owners. Ms. Schnabel asked if that money should be used first to pay for the repairs then, before they apply for a loan. Mr. Fernelius stated that he presumes that if an association can pay for it with cash, they would do that first. Mr. Bajwa asked who requested this change to be made first. How does the HRA lend this amount of money to an association on an on-going basis? There should be a practical way to implement this. There may be one unit owner requesting a loan and saying that changes should be made, but the majority may say that changes do not need to be made. Mr. Fernelius stated that the HRA is making the loan directly to the individual and assisting that individual owner with his/her share of the improvement cost. If other owners do not want to participate, that becomes a problem for the association. If not all of the owners agree to the project, then it likely wouldn't be undertaken in the first place. The primary focus has been in dealing with the individual owners. Staff wants to avoid making loans to the association. Dr. Burns asked if some projects can only be initiated by the individual owner like replacing windows. The replacement of the roofs and siding would be something the townhome association could initiate and assess back to the property owners. Is this loan program for both types of projects or just those assessed back by the association? Mr. Fernelius stated it would apply to both. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 4 Mr. Bajwa stated that he is wondering if the change is necessary. This clouds the ownership aspect and legal issues if one party is positive about a change and one party is not. Then there is conflict in the association. Mr. Fernelius stated staff is trying to help those owners who want to finance their share of the common-area improvements. The owners have the option of paying cash or going to a bank. If the association is well funded, this would not be an issue. This probably works well for bigger associations; but in smaller ones, like this one, the cash was not set aside. The association had no choice in doing this repair, and this will make financing options available to those owners who can qualify for the program. They are not going to fund all owners if they cannot qualify or are not interested; but for those who choose, this is an option. Mr. Commers asked if Minnesota Statutes require them to have a depreciable fund to cover emergency repairs. Ms. Klug stated that she does not know this, but it seemed prudent for a statutory requirement. Mr. Commers stated this is an emergency thing. The developer is long gone and there is no warranty claim against the developer anymore. Mr. George Vespa, 1249 Hillwind Road, stated that he is president of the association. They were faced with a structural and financial dilemma. He was going to put in a gas fireplace, and in the process, found out the deck and interior walls were rotten. He was faced with doing something or facing the tragedy of having the whole home collapse. Eight owners met, and they tried for an association loan, but that was not feasible. They used $10,000 of the association money they had in reserves to start the project. They needed to come up with $20,000 a piece, which is a significant sum of money. They then had the building inspector come out and asked if there was a City program that could help with their dilemma. That is how they reached Mr. Fernelius. They were able to work with a contractor who has done a lot of the work already to make their home safe. A lot of the work is done and the expense has yet to be paid for. They are very concerned about the safety of their homes and had to do something. Mr. Commers stated that because of the nature of the association, the banks would not grant a loan to the association itself. Mr. Vespa stated a lot of paperwork was involved, and it became apparent it was best to go individually. It became a matter of where they could find resources individually. Six of the eight had to apply for a loan, and the rest are paying with cash. Mr. Commers asked the age of the townhome. Mr. Vespa stated that it is about 17 years old. The rot is so bad, they had to have a structural engineer come out to consult with the contractor to decide what was the best way to repair the rot. Mr. Bajwa asked if the other two who had not applied for the loan were going to pay out of pocket? Mr. Vespa stated that they were going to pay out of pocket. The money had been partially collected. Mr. Ballinger, 1601 North Innsbruck Drive, stated that about $60,000 has been collected, but he is not sure how the people are getting the out of pocket money. The agreement at first was that HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 5 he would be paid at the end of the project. He has received barely one-third of the money, and he has almost completed the project. One person has given the full amount, one person has given one-third, and he has received small amounts from the rest of the owners. Mr. Bajwa asked if all applicants could fit the criteria for a loan. Mr. Fernelius stated that he was unsure how many of the borrower's actually are eligible. To qualify, a borrower must meet the income guidelines, credit requirements and other underwriting criteria. Those are the kinds of things looked at. Those criteria were provided up front to Mr. Vespa. Mr. Bajwa stated that if other cases like this arise, the HRA should take them on a case-by-case basis. Ms. Klug stated that legally, the townhome associations would not change. All of the by-laws would be the same; the individuals would have greater power to apply for their own loans to cover repairs. Mr. Commers stated that there would be nothing illegal or improper about the HRA determining they are willing to make the homeowners a loan on the criteria Mr. Fernelius set forth without having to adopt a modification to their program. Ms. Klug stated that the program guidelines have to be changed in order make the loans for this purpose. The under the current guidelines do not allow it. This new policy only changes the list of the eligible repairs. Mr. Fernelius stated that staff has evaluated the issue and believes a program-wide policy change is appropriate, rather trying to make provisions only for this project. Staff's preference is to establish a change in policy going forward so these owners and other townhome owners would have the same opportunity. It is his feeling that "bending the rules" may cause problems down the road. Dr. Burns stated that a concern is the apparent absence of any language here that would trigger when these loans would be made. In his townhome project, there have been lots of repairs assessed over the last couple of years. The situation of whether an owner can finance an old improvement has not been addressed. Mr. Commers stated they do have a provision that provides if the improvements have been made and paid from other sources already. For example, it states: "The loan funds cannot be used to refinance a previously completed improvement." The HRA could limit the change to just the very specific things these people need to have done which is the siding, soffits, and structural framing. Mr. Ballinger stated that the whole problem is structural. The whole inside wall was rotten. The structural members over the garage were sagging and rotted and ready to collapse. He had to tear down the decks, shore up the building, tear down the outer walls and remold it underneath. He had to set the building back down on top of the wall. He had to tear down the decks which were attached to the wall, but they were rotten anyway. The siding had to be torn off also, and the roof was replaced. Ms. Schnabel asked about the foundation. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 6 Mr. Ballinger stated they had a couple of patch jobs on the support blocks for the walls of the decks. The bottom line is that there was structural damage. Mr. Commers asked if headers over the garage that were deteriorating would be structural framing. Mr. Ballinger stated that was correct. Ms. Schnabel stated she is concerned that, under this resolution, if an individual townhome owner decided they wanted to make some type of improvement that the association was not planning on doing, they could come to the HRA and ask for a loan. Then, the HRA gets in the middle of a problem between one homeowner and the association. Mr. Ballinger stated that when a homeowner wants to make an improvement on their property, he/she has to go to the association meeting and get approval. Dr. Burns stated homeowners may also have to go before an architectural review committee. Ms. Gabel stated that she understands that the HRA would not be getting involved with that. Mr. Fernelius stated he meant that the HRA is not going to be dealing with the associations directly in terms of financing. If an owner wants to come to the HRA for a loan, the HRA would need to verify that the improvements are allowed under the townhome association bylaws. That is the condition of the loan. Ms. Schnabel asked Mr. Fernelius if he stated that this is a first step resolution and he would like to see this progress further either in study or in analysis of how this would be implied in the future. Mr. Fernelius stated he understood Mr. Bajwa's recommendation to mean that he would like to assist only this project. Mr. Bajwa stated that is correct. Mr. Fernelius stated that if they do that, it may create problems in the future. Staff is recommending a policy change that would allow any townhome owner to take advantage of this program. Ms. Schnabel asked if they feel they want to give financial assistance to this particular development because the homeowners are in a crunch. Maybe they should go slow on future applications. Would it be out of line to approve a policy that applied only to townhome developments of 8 units or less? Ms. Klug stated this was well researched and all considerations were evaluated. The program itself would change for every applicant and would allow a change on a macro basis. Doing this on a one-time basis is not something that is done as thoroughly researched. Staff has thoroughly researched a positive change that would apply citywide. Dr. Burns stated that he feels this will open up the floodgates, and it is reasonable to expect 100 applications from the Innsbruck Townhomes alone. Ms. Gabel stated that particular townhome complex is very picky about how things are done. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 7 Dr. Burns stated they are picky, but there are a lot of projects to be done and have been done, and the people are low to moderate income people. Mr. Commers asked what other programs are available. Mr. Fernelius stated there are none. They are talking about loans made out of their own resources for these kinds of improvements. Mr. Commers stated it could read that anyone with structural framing problems in his/her townhouse would be eligible. The HRA members need a consensus on this. Mr. Bajwa concurred. A broad brush approach changes too many things that are uncertain. Associations have been the entities that look towards keeping the structural integrity, but this happened over a period of time. Mr. Commers asked what was the cause of this. Mr. Ballinger stated there was no way to visually see the problems. It was only after they started tearing the decks off and the joists, that they saw all the rot. Then at the direction of the City, they started to take the siding off and never got to dry wood. The City looked at this from a fire code standpoint. Moisture started to get into the flashing above the rim joists that is supposed to go up behind the siding. The walls started to deteriorate and it snowballed. It was leaking from the first day it was built. Ms. Gabel stated that her concern is about making a blanket policy, because they do not know the ramifications or how to monitor it. Dr. Burns stated they could identify a certain amount of money available and make it a first- come/first-serve basis. He thinks there are other needy cases out there. Mr. Commers stated that requires the HRA to adopt this and broaden it out. Ms. Schnabel asked if the HRA does not adopt this, how can the HRA help? They have to adopt something. Mr. Commers stated they could limit the things available for assistance. Mr. Fernelius stated staff is trying to minimize the amount of work possible, and from an efficiency standpoint, they are only modifying the existing guidlelines. Mr. Commers stated that the general census is the HRA would like to do something, but this may be a little too far. Ms. Schnabel asked if the HRA could make loans available to townhome owners for assistance on structural defects and maybe have the loan dollar amount at a certain level. Ms. Gabel asked if the HRA could do that for now and then research this further. Mr. Fernelius stated that if a separate pot of money is set aside, they are creating a new program and would need to establish additional guidelines. Ms. Klug asked if the list of eligible exterior improvements is tied in with the MHFA list? HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 8 Mr. Fernelius stated that the list was brainstormed separately. All the listed repairs are repairs that single family owners can currently make. Mr. Vespa stated that in this case, it was either do something or face a tragedy, or get evicted from the property. They were fortunate they found a contractor that was willing to help them out. Mr. Commers asked if there was a timing issue here. Mr. Vespa stated there is a financial issue as Mr. Ballinger has used the money to pay for materials, but the money is only one-third of what the entire job was going to be. Mr. Bajwa stated this change would affect everything for every single association. To him, this is a case-by-case basis, and they may need to look at this from the standpoint that the building inspector can go out and look at this and say this property needs this work. Safety reasons could become the criteria. He is not so certain this is the program for that. Dr. Burns stated that a case-by-case basis would need a universal standard that will apply to all cases. Mr. Bajwa stated that structural safety would be the criteria, and they would have to have an assessment. Mr. Commers stated this was a dangerous situation and may have collapsed. Mr. Vespa stated that a$3,000 gas fireplace turned into a$160,000 project. They never got the fireplace because it probably would have ended up in the driveway or garage. Ms. Gabel asked if this would change the eligible exterior related improvements? Mr. Bajwa stated it would only change the ones specifically related to the project. Mr. Commers stated that it includes siding, soffits, structural framing, the roofing, and the decks or porches. Ms. Schnabel asked about insulation. Mr. Ballinger stated the only insulation involved was in the fireplace chases. The fireplace chases had not been insulated, and the inspector instructed him to insulate the chases in addition to sheetrocking the interior, etc.. Ms. Schnabel asked if the walls that were torn out were exterior walls, and would those need to be reinsulated? Mr. Ballinger stated they were the outer walls of the building. The walls to be reinsulated were in the garage. The garage walls were holding up the back wall of the house which was right above the tuck-under garage. Ms. Klug stated a shorter list that is more worthy of assistance could be tailored to common problems. Mr. Bajwa stated it might be appropriate to set a dollar limit for the loan amount itself. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 9 Mr. Fernelius stated there is a cap of $35,000 for the maximum loan. Ms. Klug stated that part of the difficulty is that the program itself is a number of pages, and they are focusing on one very narrow paragraph so it is hard to understand. All of the regular program requirements would still apply. MOTION by Ms. Gabel, seconded by Ms. Schnabel, to amend Resolution No. HRA 5-2002 that, under Improvements, everything would be deleted except for the siding, soffits, structural framing, roofing, decks or porches. Mr. Ballinger stated that fire code concerns were the chases and they were not built to code. Mr. Commers stated that Mr. Ballinger is saying they should add assistance for those parts of the building that were found in violation of a fire code. Mr. Ballinger stated that is a common problem for townhomes. Townhomes are supposed to be sheetrocked on the other side with fire-rated sheetrock. Ms. Klug stated that it could read as "Items necessary to bring the structure into compliance with the fire code." Dr. Burns stated that it could read " Fire code corrections." Mr. Commers asked if they could eliminate "iii", and not have to say what is ineligible and making limitations. Ms. Schnabel stated she could agree to that, but they should include the word "insulation". Mr. Bajwa stated you could have garage doors that need work. It is a safety issue with kids playing. Ms. Schnabel stated that repairing the structural defect becomes so enormous, the homeowners' association cannot provide funding for it. The homeowner's association has a responsibility to assess the situations and start saving for it. The garage door is one of those things. It is a safety issue the association or for which the townhome owner should be responsible. She is still going back to the structural defects. Ms. Gabel stated it is probably a better way of doing this. Mr. Commers stated that they could discuss this more after Mr. Fernelius does some more work. The timing of it seems that if they adopt something, albeit it has limited application, at least it gets them started and takes care of this or similar types of problems that might arise for a townhome owner. Mr. Bajwa stated they should approach this from the standpoint that safety and structural integrity are the key elements and leave it at that and have the association present each case to the City. Is the structure and safety compromised? That could be the subject to review. They cannot comprehensively give a list of items to comprise that. Mr. Commers stated that is reasonable. Ms. Schabel stated that includes the fire code regulations compliance. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 10 Mr. Bajwa stated this situation would address that because it was a safety and structure issue. Mr. Commers stated that the change would read "eligible exterior related improvements shall be limited to the following structural and safety defects" and maybe they can even strike the word "exterior". Ms. Klug stated that it may be hard to define safe and unsafe. The one advantage to a list is that the people administering the program can see if something is on the list or not. This would make it easy to administer the loan program. Ms. Gabel asked if "as determined by a City Inspector" could be included. Ms. Klug stated that would make it more defined. Dr. Burns stated that it could read "structural or safety related repairs including, but limited to, the following: siding, soffits, structural framing, roofing, decks, and porches." Ms. Klug asked if there was consensus on the Building Inspector's opinion being part of the criteria. It may make the program easier to administer. Mr. Commers suggested "as determined by the City Building Inspection Department". Ms. Klug stated that department clearly has the experience to draw those lines. Mr. Commers stated that it is correct. Ms. Schnabel asked if this could cover all repairs, but interior work would fall under a different program. What is done on the interior is privately owned, and not commonly owned. You have to determine this is an exterior repair requirement. Mr. Fernelius stated that common area improvements in townhome or condominium associations are addressed in paragraph A. Interior improvements are already covered under the program guidelines. Mr. Commers stated that leaving in "exterior" would seem appropriate. If there are structural defects, it could relate to both. Mr. Bajwa stated that this is interior as it relates to structural and safety issues. Ms. Schnabel stated that any repair work that needs to be done on the interior of their place, does not need this document at all. They can apply for a separate loan; and if they meet the eligibility requirements, they can obtain it. That might include the wall boards, the paint, and whatever. This is strictly being done to accommodate the common wall. Mr. Bajwa stated this is for common area and as related to safety and structure. Ms. Klug stated that paragraph A is an introduction to the eligibility of common area improvements and are guided by the smaller points. Ms. Schnabel stated that instead of "exterior", just use "common area". Ms. Klug stated that would cover some common interior courtyards or other spaces as well. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 11 Mr. Commers stated that the eligibility of common area improvement is already in there: (ii.) "Eligible related improvements, for purposes of this program... ." and then going back to what they originally had said is necessary. Mr. Fernelius stated that is correct. Mr. Bajwa asked Mr. Vespa if this accomplished what he needed. Mr. Vespa stated that he believed it does. Some changes will allow those who applied to qualify for the loan and they can look forward to a little financial assistance. Mr. Ballinger stated that the nature of the repairs they did are covered there. Mr. Fernelius stated that the change is as follows: "Eligible related improvements for the purpose of this program shall be limited to the following: structural or safety related repairs including, but not limited to, siding and soffits, structural framing, insulation, roofing, decks or porches." They need to add the additional provision stating: "As determined by the City's Building Inspector." Dr. Burns stated that the fire code is covered by safety related issues in the Resolution. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED UNANIMOUSLY. INFORMATION ITEMS: 3. 57T" AVENUE SEWER PROJECT UPDATE: Mr. Haukaas stated that this presentation was in relation to the questions raised at the last HRA meeting regarding an 8" pipe versus a 10" pipe, and other questions. From the new Medtronic site alone, an additional 480,000 gallons per day would be generated. The existing 10" pipe already flows generally to about 75% to capacity. This increase would really tax the system. Mr. Commers asked how much flow goes through the current system. Mr. Haukaas stated that he does not have that exact number, but capacity is at about 930,000 gallons per day. Mr. Commers asked if this was the sanitary sewer alone. Mr. Haukaas stated it was the sanitary sewer alone. The City of Fridley maintains a separate sanitary and storm drainage system. They are not going to a 10" pipe because the 8" pipe is already bigger than necessary, but then they get into the next phase which is maintenance. It is easier to maintain an 8", because it helps prevent clogging. They are set up to clean this every 2-3 years throughout the entire system. Mr. Commers asked if a different technique is required to go to a 10". Mr. Haukaas stated different size equipment is needed. They do the best they can with what they have for the different size pipe. Originally, this area flowed to the middle of 5th Street, then north to 57th Place and joined the main line on University Avenue. They proposed to make a connection from 7th Street straight through to University Avenue. That is how they are separating off. Some in the middle had flowed down to the other direction. That ended up HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 12 being removed and replaced and extended to the next line. They made the connection on 7tn Street and used the existing piece for the 5th to 6th Streets and put in the pipes from 5th Street all the way up to University. A major portion of the cost was to put in a steel casing for this line out underneath the state highway. The line at 5th Street and the small piece at 7th Street are the pipes they are cutting out, and this is how they are disconnecting this smaller sewer district from the larger sewer district. Mr. Commers asked if the new district is all encompassed with an 8" pipe that the City is putting in, and is this projected to carry all future Medtronic development? Mr. Haukaas stated that is correct. They look 20 years down the road at the ultimate land use development. Mr. Commers asked what the difference in cost was between an 8" and 10" pipe. Mr. Haukaas stated the cost is very little. Mr. Commers asked if we had the equipment to clean the 10" pipe that was already there. Mr. Haukaas stated they do. It is a level of quality. For cleaning the City's little amount of 10" and 12" pipes, they use their existing equipment that is sized for 8". Ms. Schnabel asked if Medtronic is currently hooked into the 10"? Mr. Haukaas stated that it is. Ms. Schnabel asked if once the 8" pipeline was completed, all the Medtronic would need is to be covered from the 10" to the 8"? Mr. Haukaas stated that is correct. The original studies show that a phased development could be handled, but it is starting to creep up to that maximum capacity. That is why they are doing this project now. The connections will be done soon. Mr. Commers asked when the study was done, did that indicate that the increase in the sewer capacity was needed? Mr. Haukaas stated the original study was done in 1986. With the developed proposal, there was another look at the study done in the meantime and compared it to what the proposal was. There was not enough significant difference to warrant a new study. Ms. Gabel asked if this would handle all future development in that section. Mr. Haukaas stated it would handle all foreseeable development. 4. GATEWAY EAST UPDATE: Mr. Fernelius stated that all 28 units have sold which is a wonderful thing and has succeeded the developer's expectations. They thought it would take longer to sell all 28 units. That project will be fully occupied by the last week of September. In addition, the developer will submit the financial report in terms of how the development was done and any net profits on this project. There will be some profits, and the impact to the HRA is in that the development contract had a provision which allows the HRA to recoup up to $65,000 related to environmental testing and HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 13 remediation. So far, the HRA has expended $6,500 on clean-up and almost $15,000 on testing and those funds will be presumably be returned to the HRA. Mr. Fernelius stated a"For Rent" sign was placed in the public right-of-way which was in violation of the City's sign code. City staff addressed that issue, and the sign was taken down. Mr. Commers asked if it was a local person who owned that unit. Mr. Fernelius stated he did not know, it was an investor. 5. ESTABLISH DATE FOR JOINT MEETING WITH CITY COUNCIL: Mr. Commers stated that this was projected for October 3. Mr. Fernelius stated that meeting is to discuss the Gateway West project. Staff wants to bring everybody up to speed before they proceed. Mr. Commers stated that the HRA has approved going out to solicit a general builder. Mr. Fernelius stated that is one of the things the HRA would be doing. He also would like the HRA to review the letter that would be going out to the neighborhood as a key piece to this project. Staff has identified one possible scenario for including the neighborhood in that process. Mr. Commers asked Ms. Gabel if she is working on this committee. Ms. Gabel stated she is. Dr. Burns stated asked if they could start the meeting at a different time. Mr. Fernelius stated that is possible. They could push back the regular meeting to a later time. Mr. Commers asked if they were going to talk about money and that type of thing. Dr. Burns stated this is a discussion process with Council. 6. FOLLOW-UP ON INTER-FUND LOAN IN TIF DISTRICT #6: Mr. Eisenmenger stated that there was a question at the last meeting regarding some of the wording that was in the Resolution as to limiting the principal amount of the loan. State Statute requires that the loan and principle be limited to the largest negative cash balance in that fund of that TIF district at the end of one year. They are then aware of the limitation and the amount of the principle. Mr. Commers asked if that negative cash balance has to be existing or in the program at the time they made the loan? Mr. Eisenmenger stated that it needs to be an existing cash balance in one year before they make the loan. Mr. Commers asked if that was with the $1,000,000 negative cash balance in that fund? Mr. Eisenmenger stated that at one time they did. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 14 Mr. Commers asked what they had this year. Mr. Eisenmenger stated that it is approximately zero now. If they incur the expenses for the 57tn Avenue sewer project, it will be negative $300,000 range. Mr. Commers asked if they could not make the loan until that expense is incurred? Mr. Eisenmenger stated that they can pre-approve the loan by Resolution as State Statutes requires, but the funds should not exceed the loan. They have to incur the expense and show that there is a negative cash balance before the loan can be made to the TIF district. Mr. Commers stated that if that is true, then they can expend the funds outside of the district in which they could raise. Mr. Eisenmenger stated that was correct, in this particular TIF district. Ms. Klug stated the original Statutes does allow increments outside of the district provided that the improvements are a direct result of development of the district. Mr. Eisenmenger stated that at this time they are saying they need to incur the expense, pay the expenses out of the General Fund, and then the General Fund will loan the money to the TIF district, and that is the negative cash balance situation that has incurred. Mr. Commers asked if there would be a memo on this then. Mr. Fernelius stated he could do that. 7. MONTHLY HOUSING REPORT: Mr. Fernelius stated that the loan origination report is the same. A total of 18 loans for $235,000 were made so far in the calendar year of 2002. The next page is the loan servicing report which showed the collections and the delinquencies. The next page is for the month of July. Overall they are at around 9.73% which is a little high, but is not anything to be particularly concerned about. That has been pretty consistent. Ms. Schnabel asked if this was regarding a total of 146 loans. Mr. Fernelius stated that the following two reports were regarding service programs offered in conjunction with CEE with the Remodeling Advisor. The Remodeling Advisor made three visits in the month of August and a total of 30 per year. Operation Insulation made two visits in the month of August for a total of 68. These numbers should pick up in the fall. Ms. Gabel asked if there was a lot of potential in that particular townhome association of Innsbruck for requests for loans. Could that potential be so great that the HRA could literally deplete its reserves. Mr. Commers stated they could only spend what is budgeted for the given year. This could use a substantial share of the money that is available. On the other hand, they have not been providing loans to the group, so there may be some pent-up demand there. Ms. Schnabel stated they have done certain things over there that may not qualify for, for instance, the roadway improvements. They have done street improvements over there also. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 15 Dr. Burns stated that the street improvements were mainly seal-coating and maintenance-type things that were paid for out of the association budget. Ms. Schnabel stated that they have done a lot of landscaping improvements. Dr. Burns stated that some of that is assessed. The major thing has been siding and painting. As they are painting, they are also getting into some chimney repairs. The building official has found that there are no fire stops in most of the chimneys. There are also other structural problems with the chimneys they are working on right now. Last year they did the roofs on everything. There was no assessment; that was paid for on the insurance claim. There are currently many decks under construction. Mr. Commers asked what is still owed on the loans to the Shorewood. Mr. Fernelius stated he does not believe there is anything owed. Ms. Schnabel stated she thought the HRA owed up to $16,000. Mr. Fernelius stated that amount has to be paid off. Mr. Commers asked if that was still up for sale. Mr. Fernelius stated that be believed so. Mr. Commers stated that he has information that a hotel is moving forward on the Lunds' site. He asked staff to check the status on that project. Ms. Schnabel stated she talked to a business owner over there and they had a plan of the entire development and what it would look like. Mr. Commers asked if they had a hotel. Ms. Schnabel stated they did and had commercial property going out to Silver Lake Road and had apartments for seniors. Mr. Fernelius stated he could get some more information on that. Ms. Gabel asked about the house that was moved by Gateway West. Mr. Fernelius stated the house on the west side of 3�d Street was moved in several years ago. Mr. Commers that they have two houses they were trying to acquire on Gateway West. Ms. Gabel stated that she was talking about Gateway East. Was there a house they demolished? Mr. Fernelius stated that the duplex there was torn down. Dr. Burns stated that United Defense is notifying 168 employees of their termination due to the loss of the Crusader program. Ms. Schnabel stated that she thought that they picked up another program. HOUSING & REDEVELOPMENT AUTHORITY MEETING, SEPTEMBER 5, 2002 PAGE 16 Dr. Burns stated they did pick up another program and saved over 600 jobs by doing that. Ms. Schnabel asked if the horizontal boards on the sound barrier walls along University Avenue boards could be painted to make them more attractive or have recourse with the State that put those things in? Mr. Fernelius stated that he knows that the HRA put in money toward the decorative pieces on those, but he was not aware of the other part. Staff can look into that. Mr. Commers stated that the sign in front of Menards looks good, but the weeds are so bad, that they distract from the sign. Dr. Burns stated that when they started that program, it was their hope to have volunteer organizations help with the upkeep of the signs, but unfortunately that has not yet worked out well. ADJOURNMENT: MOTION by Ms. Schnabel, seconded by Ms. Gabel, to adjourn the meeting. UPON A VOICE VOTE, ALL VOTING AYE, CHAIRPERSON COMMERS DECLARED THE MOTION CARRIED AND THE SEPTEMBER 5, 2002, MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY WAS ADJOURNED AT 9:42 P.M. Respectfully submitted, Signe L. Johnson Recording Secretary