Housing and Redevelopment Authority01/29P'97 WED 14:14 FAX 612 452 5550
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Nancy Mancino requested that
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01!291%9.7 WED 14:15 FAX 612 452 5550 C K S & F -:44 CHANHASSEN 0003
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I Table of Contents
i
Admowledgments ..... .. . ..................... . ... I
Pr eface ......... ............... ........ ....... 2
T ntroduction - - - - - - .- ••-- •--- "-- ••.- 3
Defuxition of EconvInkDdvetopmeat .......... ..••• 3
Lacal Economic Development Organiza .............. . ... 5
Formation and Operation of Economic Development Authorities (EDA) . _ .10
Reasons far Farntsng an EDA ................ . . . -10
py oce& res for L� 'bushing an EDA ..... • ..... , , . + ' , - - . . 10
Officers, Dafies and Organjudond Issues .............. . . .17
Po wer s of an EDA ....................... 22
, .......
Utitiing an FDA's Financing, Bonding and Taxing Authi* ....... 31
t &n of Powers ............................. 35
,bm
Combining Housing Redevelopment Authority (KRA) powers into an EDA .37
HRAPowers ...................... _ ... . , , ..... 38
Financing Projects using MA Powers ......... • , ........ 41
Appendix............. ....... .................. 47
Conemrenby Examples ................. I ..... • .. • . _ 47
Tables ......... .................. ..........5Z
Soopkjtesolutians andRylaws ........... • • . • ........ 56
Glossary ......... .............................
. ...73
Bibli ography
. ...............................
011 97 ITED 14:15 FAX 612 452 5550 C K S & F
Combining HR Power# into an EDA
4y4 CHANHASSEN U004
As part of the EDA Act the Minnesota Legislatun; authorized BDA's the ability to exercise all powers
gamed tv HRA. The purpose of an HRA is to provide adequate housing for low and moderate income
residents and to clear and redevelop blighted areas.
Consolidation of NRA's Into EDA's
Number
Parcont
Have Cormlidated HRA with EDA 14
25.09'0
Planning to Gonsolldate 7
2.5
Not planning to Gonsolidale 35.
62.5
Souse: MN Sersia Research Report- E:wmr* OeveIcpmem AUMWM4w, PaIri4*J, McCoaftck Mbbgr 1990.
Because the list of HRA powers is very expansive this chapter will only focus on those powers that
may be used for redevelopment purposes.
Primary Development Purpose for EDA
Number Percent
Primarily Economic Development 67 63.8%
Primarily Housing Development 2 1.9
For Both Developmerdk Purposes 36 34.3
SmNw. MN Serma Research Report- C -mmsie Owelopnwi Ar, h9dtee, PaarickJ, McCarmad� oeaber 190*,
37
01x29/97 WEIR 14:16 FAX 612 452 5550 C K S & F y44 CHANHASSEN laoos
HRA Powers
When establishing a redevelopment project, the EDA rnuSt develop a redevelopment plan outlining
the purpose of the project and methods of financing. Thee plan must also include a copy of the written
option of the cities planning agency or deparunent
The City Council must approve or disapprove the plan within 30 days after holding a public hearing
to review all aspects of the project. The council must make the following findings in connection with
its approval:
1, The land in the pr ject =a would not be made available for redevelopment without the financial
aid from the EDA.
2 ?'he redevedopnwot playas for the redevelopment areas in the city will afford maximum
appottnnity, consistent with needs of the City as a whole, for the redevelopment of the areas by
private enterprise.
3. The redo elopment plan conforms to the general comprehensive plan for the development of
the City. : .
Prior to final approval of the redevelopment plan by the City Council, the EDA may obtain control of
any zeal property within the designated project area by entering into an option agtt =nL Ilse EDA
may not uncondidonally obligate itself to the purchase of the pmperry until the plan tcccivcs approval
by the council.
Acquisi>rtion of Open Land
The redevelopment plan rosy include any work or undertaking to acquire open or undeveloped land
detmmtried to be blighted by virtue of the Mowing conditions:
1. If the property has unusual and difficult physical characteristics.
2. There is an existence of faulty planning characterized by the subdivision or sale of lots laid out
in disregard of the contours or of irregular form and shape or of inadequate size.
I A corribination of 1 and 2 or other conditions which have prevented development of the land by
private enterprise and have resulted in 'a stagnant and unproductive condition of the lands potential
use and value for contributing to the public health, safety and welfare of the city."
Mnrewm Stoic 469.029
Miftnewta SmLm 489.028, Subd ai m 2
39
01/29.'97 WED 14:16 FAX 612 452 5550 C K S & F -�44 CHANHASSEN 0 006
Acquisition of Unused or Inappropriately Used Land
A redevelopment project may include any work or undertaking to acquire land or space that is vacant,
unused under used or inappropriately used. This may include infrequently used rail yards and rail
storage f dlides, and ex=sive or vacated railroad rights -of -way and railroads. It may also include
air rights over streots, expressways, waterways. and similar locations; land which is occupied by
functionally obsolete norursidendal buildings, or is used for low Lititity purposes, or is covered by
shallow water, of is subject to periodic flooding, or consists of unused or under used slips or dock
areas or other waterfront property.
A project can only occur on land or space which the EDA determines may be developed at a cost
reasonably slated to th public purpose to be served without major residential clearance activities, and with
full considention of the pteservadon of beneficial aspects of the urban and natural environment The uses
for the praject must be consistent with an emphasis on housing for low and moderate income families.
These sues include the provision ofschools. hospitals, parks and other essential public facilities, where
appropriate, and all uses associated with new community development programs or similar large scale
undertakings that are related to inner city needs. including concentrated sources of employment.
Sale and Acquisition of Real and Personal Property
An EDA may give, sell, transfer, convey or otherwise dispose of real or personal property or any
interest therein and may execute leases, deeds, conveyances. negotiable instruments, purchase
agreements, and other contracm or insxmrnants. or obligation evidencing or securing a loan made for
the purpose of econornic development. job creation, redevelopment, or community revitalization by
a public agency to a buisine� for - profit or nonprofit organization or individual, and take action that
is necessary or convenient,
The EDA may also acquire teal or personal property or any interest therein by gifts, grant purchase,
exchange, lease, transfer, bequest, devise or otherwise and by the exercise of the power of eminent domaim
Because the public use of the EDA for Tedevelopment purposes is seen to be of a higher public purpose,
the EDA may acquire real property that is devoted for a public purpose whether or not it is held in
trust; notwithstanding that the proper may have been previously acquired by condemnation or is
owned by al public utMty corporation. .'*
` MnMSOM St ire 469AM Sua m 2
lNemseM Stamm 469.028. S'ubdivisivd 4
M1ftnM12 SPAWO 489Al2. Subd - M%iW 1($) 4 (29)
Mnnasam StaWb 458,012, Subd*Wgn 1(8j
39
01/29, 11TED 14:17 FAX 612 452 5550 C K S & F iii CHANHASSEN X1007
Studies
'Me EDA may carry out studies of the housing and redevelopment needs within the community. ''Ile
swdy may include data on population and family groups and their distribution according to income
groups, the amount and quality of available housing and its distribution according to rentals and sates
prices, cmployment� wages. desirable patterns for land use and community growth, and other factors
affecting tho local housing and redevelopment needs and the meeting of those needs. Results of all
studies must be made available to the public and to enterprises in the building, housing and supply
industries.
Coniprehensbe Plans
If the city government does not have a planning agency or the planning agency has not produced
a comprehensive or general cornmuniry development plan, the EDA may develop or have
developed a detailed comprehonsive plan to use as a guide for undertaking its housing and
redevelopment efforts.
Inventory of Laird and Buildings
The EDA may compile and maintain a catalog of all cant, open and undeveloped land or land which
contains substandard buildings and improvements.
Joint Powers Agreements
Any two or more EDA's using HRA powers or together with an HRA may join with one another Tb
exer6se, either jointly or otherwise, any or all of their powers. This joint powers agreement may be
used for the purpose of financing, including the issuance of bonds and giving security, planning,
undertaing. owning, constructing, operating, or contracting a housing project located within the area
of operation of any one or more of the EDA "s or MBA's. The EDA may by resolution authorize any
other housing authority or EDA utilizing HRA powers, to act on its behalf with respect to any or all
powers, as its agent or otherwise_
A city, county or multi- county authority may by resolution authorize another housing authority to
exercise its powers within the authorizing FDA's area of operation at the same time that the authorizing
authority is exercising the same powers.
Wanvnota $t lm 460.012, sub�*n 108
Mwasatt S Oft 469.012, sub4m&n t (1
••• Mhmwts ftWb A69.012. $vbdM5bn 1 (261
4 0
01/ WED 14:18 FAX 612 452 5550 C K S & F 44-> CHANHASSEN la 008
A county or city may join with any authority to permit the authority, on behalf of the county, town
within the cocnty, or city, to plan, undertake, administer, and carry out a leased existing housing
assistance payments pr+ograrrt. A city may also join with another authority. unless these is an authority
in the city which has been authorized by resolution to transact business or exercise powers. A county
may join with another authority unless (a) there is a county authority which has been authorized by
resolution * to exercise powers. or the county is a member of a multi- county authority, and (b) the
authority has initiated or has in progress an active program or has applied for federal assistance in a
public housing, Section 9, or redovelopment program within 12 months after its establishmen�
Parking Facilities
An EDA may operate and maintain public parking facilities in connection with any of its projects,
Financing Projects using HRA Powers
The cti&e cost of a project. including administrative expenses of the authority allowable to the project
and debt charges and all other costs authorized to be incurred by the authority, is known as the public
redevelopment cost. The proceeds for the sale or lease of property in a project is known as the capital
proceeds. The capital proceeds for land sold may pay back only a portion of the public redevelopment
cost The EDA may finance the projects using one or a combination of the following methods:
Federal Grants - The EDA may accept groans or other financial.-assistance from the 'federal
govemrnent. Before it uses otherfinancial methods, the EDA must use all federal funds for the qualified
project. L
Bond Issue - The EDA may issue bonds for any redevelopment project. The bonds most be secured
by mortgages upont *e property or to be held'by the RDA or by pledge of its revenues, including giants
or GortxCilaaQCnS.
in 1992 the Legislature passed legislation granting cities the authority to allow MA's or EDA's with
HRA powers to extend their general obligation pledge to suppon housing redevelopment revenue
bonds, provided:
1. The pledged revenues exceed 110% of debt service on the bonds.
Whresoin Sla1ua 440
-- Wr9alu 51aad 468.004
••• 1utnnowa S4tem 444.012.804Wgion 3
F&riesota SIMW o 460.012, "*Asian 1(15)
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01/29/97 WEIR 14:15 FAX 612 452 5550 C K S & F CHANHASSEN . 2 u(19
2. proceeds must be used only for qualified housing development projects. These include projects
forelderly individuals or individuals with Incomes less than or equal to 90% of the median income
for the MSA or non - metropolitan county where the project is located.
3. A public bearing has been conducted by both the city and the EDA at least 15 but not more than
120 days prior to the bond sale.
4. The bonds do not exceed the greater of 1l2% of the taxable market value or $3,000,000.
These bonds are not subject to voter approval. but are subject ro Minnesota Statute governing bonded
indebtedness.
The advantages of using this program are numerous because them is no need for outside credit support.
no need for separate consnvetion funding, lowers the cost of issuance, lowers the coverage testrequired
for revenac bonds. lowers occupant rents, no election is required, and it does not count against the
debt limit of the city.
Revenue Pool - The EDA may provide that all revenues received from its redevelopment areas be
placed in a pool for the payment of interest and principal on all bonds issued for any redevelopment
project, and the revenue; from all such areas must be paid into the pool until all outstanding bonds have
been fuIIy paid.
Special Benefit Tax Fund - If the EDA issues bonds to finance a redevelopment project, it may, with
the consent of the City Council, notify the county treasurer to set aside in a special fund, for the
retirement of the bonds and interest on them. The amount of the levy may not exceed 0.0131 % of the
Taxable market value of zeal and personal property in the taxing district. The EDA may levy an
additional levy not to exceed 0.0013% of taxable market value to defray the cost of providing
informational service and relocation assisrance families, individuals, businesses and non -profit
organiaadons that may be displaced by the activities of the project *
Fropeny Tar Exemption
A developer proposing to construct a building within a redevelopment project can apply to the City
Council to obtain a partial tax exemption. The project must be designed and used primarily for housing
purposes, but portions of it may be, planned and used for related businesses, commercial, cultural, or
recreational purposes.
Mjnrwsosa stature 4$9.033. SubdM$lon 58: Mtnnwel Statuaa 460.012. SO&Wan U29)
42
01429:9 i IVED 14 19 FAX 612 452 5550 C K S & F CHANHASSEN U 010
'ihc City Council may exempt the project from all local taxes up to 50% of the net tax capacity of ft
development which represents an increase over the net tax capacity of the property. This may include
both land and hTVov*=nts acquired for the development at the time of its original acquisition. If the
City Counca approves of the exemption, the development will also be exempt from any or all county
and school district ad valorem property taxes for the duration of the municipal exemption. The
exemption can be extended for a maximum of 10 years. Exemption frnrn special assessments or from
paya=t of inspection, supervision, or auditing fees is allowed."
please note that the City Council must pro vide an opportunity for County Board and School Board to
make written comment on the proposal.
Romowing and Acceptance of Funds
The EDA may borrow money or other property and accept contributions, grants" gifts, services, or
other assistance from tho federal govemment, the state government, stage public bodies, or from any
other public or private source.
Rehabilitation Loam and Grants
A i EVA stay develop and administer a housing rehabilitation loan and/or a grant program anywhere
within the city limits to persons of low and moderate income, to rehabilitate their property.
interest Reduedon Program =
An EDA may develop and administer an interest reduction (buy -down) program to assist the financing
of the construction, rehabiktation, and purchase of housing units which are intended primarily for
occupancy by individuals of low or moderate ineorra and related and subordinate facilities or for
commercial =habilitation projects. An EDA is allowed to do one or all of The following:
I. It may pay iri periodic.payments or in one lump sum payment any or all of the interest on loans.
2. Thv EDA may pay any, or all of the interest on bonds issued for the purpose of*making leans for
a housing rehabilitation program.
rdnnswft 3aaft 469948, Subftvlan 1 -2
Mnmwta Statm 45S.M. SUbdF Wart 3
Minnineta Shoo Mg -072. Srib*Anion I(S)
43
01/29/97 WED _14:20 FAX 612 452 5550 C K S & F 4-y4 CHANHASSEN [a011
I The EDA may pay in periodic payments or in one lump Sum payment any or all of the interest
on loans made by private lenders to purchasers of housing units_
4. It may pay any or all of the intetemt due on loans made by private lenders to a developer for the
constmetion ormbabilitadon of ]rousing units.
5. It may pay in periodic payments or one Jump sum payment any Or all of the interest on loans
made by any person to a developer for the construction, rehabilitation, and purchase of
commercial facilities which are related and subordinate to the cOnSirucdon, rehabilitation,
purohase of houdng units that receive interest reduction assistance provided that the entire
development is composed primarily of housing units.
d. The EDA may pay in periodic payments or in one lump sum any or all of the interest on loans
that are part of a commercial rehabilitation program,.
7. The FDA may pay any or all of the interest on bonds issued for commercial mdevclopment
progmMs.
The following is a list of restrictions that apply to the opemdon of an interest reduction pr'ogram:"
1. Before utilizing the interest rcducdon program. the EDA must determine the availability and
affordability of other governmental programs that may be used to develop the project.
2. The EDA must dotetmine the availability and affordability of private market financing that may
be use$ to develop the project
I The EDA must determine the need for additional affordable mortgage credit to construct and
enable the purchase of housing units within the city_
4.: The EDA may not authorize the usa of funds for the inoetest,teduction program if it determines
that the applicant can obtain financing from private lenders with terms and conditions that are
affordable to complete the project.
5. Thu ADA must establish rules and procedums to govern the use of funds for an interest redaction
ProvMM
Mhnasauk sra+ur 460.180
•• Mhrow0r SMUM 086.012. SUbdl-fton 8.9
44
01!29/97 WED 14:20 FAX 612 452 5550 C K S & F iii CHANHASSEN a 012
6. In order to limit possible abuse and/or fraud, the EDA must obtain from the developer, or from
the individual benefirng from the interest reduction program, an agreement that stipulates if the
property is sold or transferred within a predetermined period.of tinx after funds have been
disbursed, the RDA TMy require one of the following repayment terms:
(SP —DP— OP — M) DP + +1P = BDA Nyment
SP = Sale Prise DP = Down Payment OP Other Payments PTD a Payment to Developer
P M Principal IP = Interest payment !RP Inmmi Reduction Payment
a_ The sale priers of the property, less
b. the down payment, any payments of principle. other payments made to construct, acquire, .
or improve the property and any outstanding liens or mortgages securing loans, advances,
or goods and services provided for the aoristruation acquisition. or improvement of the
property, less
c. the amount„ if any. which the authority determines should be allowed for the developer or
other benefited property owner as a return on the developer's or other benefited property
owner's investment in the property, multiplied by
d. a fraction, the numerator of which is the interrcs t reduction payments made by the authority
and the denominator of which is the total of the down - payment, all principal and interest
payments including any portion paid by the authority, and %herpayments made to construct,
acquire, or improve the property. In the case of a transfer, other than an arms - length sale,
and appraisal shall be substituted for the sale price.
The City of Hastings is one of several communities that have utilized this program. 7heirprop2m has
several components that = designed to assist businesses to make improvements to commercial
buildings, storefronts and rear entries, as well as signage improvements. The Hastings FIRA works
together with the local banks throughout the entire loan process. The business applies to the bank for
the improvement loan and is required to meta the banns loan eligibility criteria as it would for other
types of loads. Once the loan is approved by the bank, the HRA must approve the project to ensure
that it follows the cities improvement guidelines.
Wnecard same 489.012. a *oviman 9
45
01 %29/97 WED 14:21 FAX 612 452 5550 C K S & F 444 CHANHASSEN 1 013
The following is a list of the components.
I. If a building owner is interested in m*ing major improvements, the lete= Reduction Program
will reduce the interest due on a rehabilitation Ioan by 6 points. For example, a loan with an
in=%t rate of 11% would be reduced by 6% to a 5% interest rate. The loan amount Iimit is
$200,000 with a maximum I'RP payment of $7,500. The building owner may use the funds to
finance any improvement oxcept: for fixtures that can be moved. An additional design credit of
$500 is available for businoss owners who utilize the services of an architect to remodel the
storefront.
2. For exterior improvements to the back of the buildings, for the repair or replacement of porches.
%indows and doors, cleaning and painting, the building back and alley improvement component
will pay 25% of the approved costs. up to a maximum of $500 per 22 feet of building width_
3. The third component focuses on signage teptacemcnt. The Sign Improvement Program will pay
25% of Oie approved costs, up to a maximum of $250.
4. For apartment improvement/rehabilitation, 50% of the rehabilitation cost will be lent without
interest, to be repaid upon the sale of the property. This component is run jointly with the Dakota
County BRA.
Additional components: By working with the State Historic Preservation Office and the National Paris
Service, a 20% tax credit may be authariud. The investment tax Credit allows the owner or partners
to deduct 20% of the approve costs from their tax liability.
46
TOTAL. P.12