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HomeMy WebLinkAboutItem 08PUBLIC HEARING TO CONSIDER THE CREATION OF A HOUSING IMPROVEMENT AREA FOR NIAKWA VILLAGE SECOND ADDITION June 18, 2012 City Council Meeting Proposed Action Staff recommends adoption of the following motion: Move to adopt the attached ordinance and ordinance summary creating a Housing Improvement Area for Niakwa Village Second Addition. Passage of this motion will result in the creation of a Housing Improvement Area (HIA) to finance exterior improvements in this townhome development. Overview Minnesota Statutes 428A authorizes cities to create HIA(s) to assist in the financing of improvements to privately -owned residential units that are the responsibility of the homeowners association. The City Council discussed the concept of HIA(s) at a City Council Work Session last August and adopted the attached policy on September 6, 2011. The City has received a formal petition requesting the creation of a HIA from the Niakwa Village Second Homeowners Association. Petitions were signed by 32 of the 52 owners of units in the association which is 62% of the owners. Minnesota Statutes require a minimum of 51% of the owners sign petitions in order to consider the creation of HIA. The current estimated costs for exterior improvements are estimated not to exceed $524,900. The improvements are proposed to be financed by the Dakota County CDA and will be repaid by individual owners over no more than a 15 year period with interest. The Homeowners Association is proposing to contribute $100,000 up front to the project. The actual imposition of fees will require a future hearing once a financing agreement is reached between the City, CDA and Niakwa Village Second Addition Homeowners Association. Staff recommends approval of the attached ordinance. Primary Issues to Consider • What is the cost for the City to approve a proposed HIA? All of the costs associated with creating and implementing a HIA will be borne by the property owners. Supporting Information • Ordinance and Ordinance Summary authorizing the creation of a HIA • emos d- • 6/11/12 an •/8/12 from Springsted Inc. and the Dakota County CDA 'rf: L. • Ison Community and Economic Development Director Item No. c: Deborah Haugh, Dakota County CDA, Carin Rosengren, Keller Property Management Financial Impact: $ None Budgeted: Y/N Source: AN ORDINANCE ESTABLISHING THE NIAKWA VILLAGE SECOND ADDITION HOUSING IMPROVEMENT AREA PURSUANT TO MINNESOTA STATUTES, SECTIONS 428A.11 TO 428A.21. 1.01. The City of Lakeville ( "City ") is authorized under Minnesota Statutes, Sections 428A.11 to 428A.21 (the "Act ") to establish by ordinance a housing improvement area within which housing improvements are made or constructed and the costs of the improvements are paid in whole or in part from fees imposed within the area. Policy. Section 1. Recitals. ORDINANCE NO. CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA BE IT ORDAINED by the City Council of the City of Lakeville as follows: 1.02. The Lakeville City Council ( "Council ") has adopted a Housing Improvement Area 1.03. The City has determined a need to establish the Niakwa Village Second Addition Housing Improvement Area as further defined herein, in order to facilitate certain improvements to property known as the "Niakwa Village Second Addition Townhomes," all in accordance with the Housing Improvement Area Policy. 1.04. The City has consulted with the Niakwa Village Second Addition Homeowners Association (the "Homeowners Association ") and the townhome owners regarding the establishment of the Niakwa Village Second Addition Housing Improvement Area and the housing improvements to be constructed and financed under this ordinance. Section 2. Findings. 2.01. The Council finds that, in accordance with Section 428A.12 of the Act, owners of at least 50 percent of the housing units (and more than 51% as required by the City's policy) within the Niakwa Village Second Addition Housing Improvement Area have filed a petition with the City Clerk requesting a public hearing regarding establishment of such housing improvement area. 2.02. On June 18, 2012, the City conducted a public hearing, duly noticed in accordance with Section 428A.13 of the Act, regarding adoption of this ordinance, at which all persons, including owners of property within the Niakwa Village Second Addition Housing Improvement Area, were given an opportunity to be heard. 1 2.03. The Council finds that, without establishment of the Niakwa Village Second Addition Housing Improvement Area, the Housing Improvements (as hereinafter defined) could not be made by the Homeowners Association or the housing unit owners in the Homeowners Association. 2.04. The Council further finds that designation of the Niakwa Village Second Addition Housing Improvement Area is needed to maintain and preserve the housing units within such area. 2.05. The City will be the implementing entity for the Niakwa Village Second Addition Housing Improvement Area and the improvement fee. 2.06. The Council finds that the Niakwa Village Second Addition Housing Improvement Area meets each of the approval criteria contained in the Housing Improvement Area Policy, including the criterion that a majority of the Homeowners Association owners support the project and the Housing Improvement Area financing. The Homeowners Association presented evidence to the Council adequate to demonstrate that these criteria were met, including presentation to the Council of the petition described in 2.01 above. Section 3. Housing Improvement Area Defined. 3.01. The Niakwa Village Second Addition Housing Improvement Area is hereby defined as the area of the City legally described as Lots One (1) through Fifty -two (52), and Outlot A, Niakwa Village Second Addition, Dakota County, Minnesota. 3.02. The Niakwa Village Second Addition Housing Improvement Area contains Fifty - two (52) housing units as of the date of adoption of this ordinance. Section 4. Housing Improvements Defined. 4.01. For the purposes of this ordinance and the Niakwa Village Second Addition Housing Improvement Area, the term "Housing Improvements" shall mean the following improvements to the housing improvement area and common areas within the Niakwa Village Second Addition Housing Improvement Area: Building Exteriors Replace siding on thirteen (13) buildings Repair any underlying structural problems discovered during siding replacement Replace /repair decks as identified Replace garage doors as identified Replace outdoor lighting. 4.02 Housing Improvements shall also be deemed to include: 2 (a) all costs of architectural and engineering services in connection with the activities described in Section 4.01; (b) all costs incurred by the Association prior to the adoption of this Ordinance, but in furtherance of the construction of the housing improvements described in Section 4.01; (c) all administration, legal and consultant costs in connection with the Niakwa Village Second Addition Housing Improvement Area; and (d) costs of arranging financing for the Housing Improvements under the Housing Improvement Act; and (e) interest on the internal loan as described in Section 6.01. Section 5. Housing Improvement Fee. 5.01. The City may, by resolution adopted in accordance with the petition, hearing and notice procedures required under Section 428A.14 of the Act, impose a fee on the housing units within the Niakwa Village Second Addition Housing Improvement Area, at a rate, term or amount sufficient to produce revenues required to provide the Housing Improvements (Hereinafter referred to as the "Housing Improvement Fee "), subject to the terms and conditions set forth in this Section. Financing may be provided through available funds of the Dakota County Community Development Agency ( "CDA ") if such financing is determined to be cost effective. 5.02. The Housing Improvement Fee shall be imposed on the basis of the total cost of the Housing Improvements to be financed by the Housing Improvement Fee, divided by the number of housing units (all fifty -two (52) lots) within the Niakwa Village Second Addition Housing Improvement Area as of the date of any fee resolution. The Council specifically finds that such per -unit calculation is more fair and reasonable than a fee based upon the tax capacity or square footage of each housing unit, because the Association uses the per -unit basis for allocation of other costs among unit owners, and the benefits created by the Housing Improvements do not significantly vary by either the tax capacity or size of the units. 5.03. The Housing Improvement Fee shall be imposed and payable for a period no greater than fifteen (15) years after the first installment is due and payable. 5.04. Housing unit owners shall be permitted to prepay the Housing Improvement Fee in accordance with the terms specified in the resolution imposing the fee. 5.05. The resolution imposing the Housing Improvement Fee may provide that any fee not prepaid by the housing unit owner shall be deemed to include interest on unpaid Housing Improvement costs at the rate of up to 6.75% per annum. 3 5.06. The Housing Improvement Fee shall be collected at the same time and in the same manner as provided for payment and collection of ad valorem taxes, in accordance with Section 428A.15 of the Housing Improvement Act and Minnesota Statutes, Section 428A.05. As set forth in Section 428A.14, subd. 2 of the Housing Improvement Act, the Housing Improvement Fee is not included in the calculation of levies or limits on levies imposed under any law or charter. 5.07. The Housing Improvement Fee shall not exceed the amount specified in the notice of public hearing regarding the approval of such fee ; provided, however, that the Housing Improvement Fee may be reduced after approval of the resolution setting the Housing Improvement Fee, in the manner specified in such resolution. Section 6. Housing Improvement Area Loan. 6.01. At any time after a contract with the Homeowners Association for construction of all or part of the Housing Improvements has been entered into or the work has been ordered, and the period for prepayment of the Housing Improvement Fee has expired as described in Section 5.04 hereof, and provided that the Council has secured the necessary bonds to finance the loan contemplated herein, the Council may begin disbursement to the Townhome Association of the proceeds of the bond sales (the "Loan ") of available City funds in the principal amounts necessary to finance the cost of the Housing Improvements that have not been prepaid, together with administrative costs. Financing may be provided through available funds of the CDA is such financing is determined to be cost effective. Section 7. Annual Reports. 7.01. On May 1, 2013, and each year thereafter until there are no longer any outstanding obligations in connection with the Niakwa Village Second Addition Housing Improvement Area, the Homeowners Association (and any successor in interest) shall submit to the City of Lakeville and the CDA , a copy of the Homeowners Association's audited financial statements. 7.02. The Homeowners Association (and any successor in interest) shall also submit to the City any other reports or information at the times and as required by any contract entered into between that entity and the City and the Dakota CDA. Section 8. Notice of Right to File Objections. 8.01. Within five days after the adoption of this ordinance, the City Clerk is authorized and directed to mail to the owner of each housing unit in the Niakwa Village Second Addition Housing Improvement Area: a summary of this ordinance; notice that owners subject to the 4 proposed Housing Improvement Fee have a right to veto this ordinance if owners of at least 45 percent of the housing units within the Niakwa Village Second Addition Housing Improvement Area file a written objection with the City Clerk before the effective date of this ordinance; and notice that a copy of this ordinance is on file with the City Clerk for public inspection. Section 9. Amendment. 9.01. This ordinance may be amended by the Council upon compliance with the public hearing and notice requirements set forth in Section 428A.13 of the Act. Section 10. Effective Date. 10.01. This ordinance shall be effective 45 days after adoption hereof. Adopted by the Lakeville City Council this day of , 2012. ATTEST: CITY OF LAKEVILLE City Council By: Charlene Friedges By: Mark Bellows Its: City Clerk Its: Mayor 5 This ordinance establishes the Niakwa Village Second Addition Housing Improvement Area to facilitate certain common area improvements and financing of the improvements. The ordinance defines the housing improvements, provides the method for adopting and collecting a housing improvement fee, sets forth the terms for disbursement of the loan to the Townhome Association for the housing improvements, requires certain annual reports by the Homeowners' Association and requires mailed notice to property owners of the right to file written objections to the ordinance prior to the effective date of the ordinance. A printed copy of the entire ordinance is available for inspection by any person during the City Clerk's regular office hours. ATTEST: Charlene Friedges, City Clerk 164961 SUMMARY ORDINANCE NO. CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA SUMMARY OF ORDINANCE NO. ESTABLISHING THE NIAKWA VILLAGE SECOND ADDITION HOUSING IMPROVEMENT AREA PURSUANT TO MINNESOTA STATUTES, SECTIONS 428A.11 TO 428A.21 Approved for publication by the City Council of the City of Lakeville, Minnesota, this day of ,2012. CITY OF LAKEVILLE BY: Mark Bellows, Mayor Niakwa Village 2nd Addition Disclaimer: Map and parcel data are believed to be accurate, but accuracy is not guaranteed. This is not a legal document and should not be substituted for a title search, appraisal, survey, or for zoning verification. Map Scale 1 inch = 272 feet no et CDA D 4tkolo. COullty Coriirt'iutity 0e'4e1IGFtri en! Age MEMORANDUM DATE: June 11, 2012 TO: Dave Olson, City of Lakeville FROM: Deborah Haugh, Dakota County CDA RE: Niakwa Village II - Housing Improvement Area Financing Application On June 1, 2012, the City received a revised Housing Improvement Area (HIA) application from The Niakwa Village II Homeowners Association. The primary change reflected in the revised application was a $172,600 reduction in the estimated cost of the proposed capital improvements, primarily due to changing from a fiber cement siding product to a less costly vinyl product. Springsted has provided a preliminary analysis of the potential for the CDA to provide financing directly rather than financing the project through issuance of bonds by the City. The CDA has reviewed this analysis and remains open to considering this option. At this time, the CDA is undertaking a thorough review to determine the specific terms of any financing it is willing to provide. If agreement on the financing terms can be reached, the CDA will seek all necessary approvals and draft documents for execution to enable the project to move forward subject to final City approval. DRAFT MEMORANDUM Springsted TO: David Olson, Community & Economic Development Director, City of Lakeville Deborah Haugh, Housing Finance Manager, Dakota County CDA FROM: Mikaela Huot, Vice President /Consultant DATE: June 8, 2012 SUBJECT: Proposed Housing Improvement Area — Dakota County CDA Financing Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101 -2887 Tel: 651 - 223 -3000 Fax: 651 - 223 -3002 www.springsted.com The City of Lakeville has asked Springsted to provide a preliminary analysis of a Housing Improvement Area for a town home association located in the City. The purpose of this memo is to describe the process for establishing a housing improvement area as well as provide the preliminary project financing for the proposed project described below. Town Home Association: Niakwa Village 2 Addition: The Niakwa Village 2nd Addition on Flagstaff courts north and south is a town home complex comprising of 13 buildings with a total of 52 units. It is our understanding that the current property manager and association for the town homes have determined that improvements to the buildings are necessary and have submitted an application to the City of Lakeville for assistance in financing total project costs of $524,900. Projects include the removal and replacement of existing siding, replacement of the soffit and fascia, new Tyvek house wrap and aluminum wrap around doors and window. The town home association has requested that the City consider establishing a housing improvement area to finance the necessary improvements. The association has provided background information indicating the inability to obtain private financing to complete the improvements. The housing improvement area fee can be determined and calculated at the City's discretion. The fee can be imposed on the basis of the tax capacity of the housing unit, or the total amount of square footage of the housing unit, or a method determined by the Council and specified in the resolution. The service charges based on net tax capacity may be payable same as ad valorem taxes. Other service charges imposed would be collected as provided by ordinance. The property owners also have the right to prepay the fees. Public Sector Advisors City of Lakeville, Minnesota Niakwa Townhome Association Proposed HIA June 8, 2012 Page 2 For our analysis we are using total project costs of $524,900. The association has available funds of $100,000; therefore the total loan amount will be approximately $424,900 plus financing costs of $5,000. The association has requested a term of 20 years; however the City and CDA has indicated 10 and 15 year terms based on the following assumptions: o Total Project Costs of $524,900 • $100,000 Association • $424,900 Project Costs • $5,000 Financing Costs • Interest rate of 6.75% o 10 and 15 year terms For estimation purposes we have allocated the project costs, including costs of issuance and interest on a per unit basis, and have illustrated the amounts on both an annual basis and cumulatively. This allocation could be adjusted based on an agreed -upon allocation by Council using one of the methods described previously. The chart on the following page shows the estimated improvement cost per unit based on the alternate financing options. As a note, the amount per unit could change if the total costs were allocated on a tax capacity or square footage basis. Thank you for the opportunity to be of assistance to the City of Lakeville. Please let us know how we can best assist the City as this project moves forward. We would be happy to discuss at your convenience at 651- 223 -3036 or mhuot(a springsted.com. Dakota County CDA Financing Financing Term 10 years 15 years Financing Interest Rate 6.75% Estimated Project Costs $524,900 Estimated Costs of Issuance + $5,000 Association Reserve Cash Contribution - $100,000 Principal Amount of Loan = $424,900 Estimated Interest + $168,242.35 $260,388.18 Estimated Total Payments = $598,142.35 $690,288.18 Number of Units 52 Estimated Cost per Unit over 10 Years $11,502.74 $13,274.77 Estimated Annual Cost per Unit $1,150.27 $884.98 Estimated Semi - Annual Payments $29,907.12 $23,009.61 Estimated Annual Payments $59,814.24 $46,019.21 City of Lakeville, Minnesota Niakwa Townhome Association Proposed HIA June 8, 2012 Page 2 For our analysis we are using total project costs of $524,900. The association has available funds of $100,000; therefore the total loan amount will be approximately $424,900 plus financing costs of $5,000. The association has requested a term of 20 years; however the City and CDA has indicated 10 and 15 year terms based on the following assumptions: o Total Project Costs of $524,900 • $100,000 Association • $424,900 Project Costs • $5,000 Financing Costs • Interest rate of 6.75% o 10 and 15 year terms For estimation purposes we have allocated the project costs, including costs of issuance and interest on a per unit basis, and have illustrated the amounts on both an annual basis and cumulatively. This allocation could be adjusted based on an agreed -upon allocation by Council using one of the methods described previously. The chart on the following page shows the estimated improvement cost per unit based on the alternate financing options. As a note, the amount per unit could change if the total costs were allocated on a tax capacity or square footage basis. Thank you for the opportunity to be of assistance to the City of Lakeville. Please let us know how we can best assist the City as this project moves forward. We would be happy to discuss at your convenience at 651- 223 -3036 or mhuot(a springsted.com. City of Lakeville City of Lakeville PRELIMINARY APPLICATION HOUSING IMPROVEMENT AREA FINANCING Legal Name of Association: Niakwa Village II Mailing Address: Name of Contact Person: Josh Walker Name of Management Firm /Agent (if different than contact person) Keller Property Management /Carin Rosengren Legal Description of the Project Site: REQUESTED INFORMATION Addendum shall be attached hereto addressing in detail the following: 1. Give a general description of the project. 2. Explain how the project will meet the goals of the City Council as identified in Section II of the City of Lakeville Housing Improvement Area Policy. 3. Provide a proposed timeline for the project including the dates of membership meetings to discuss a project, submittal of required petitions, public hearings, construction start, submission of first draw request and project completion. 4. List of improvements and estimated project budget. Phone: Phone: 5. Explain why Housing Improvement Area financing is necessary to undertake the project. Attach any documentation regarding efforts to secure private financing. 6. Explain the process used to determine the scope of the proposed project and the desire for HIA financing among the association members. Provide any documentation regarding owner meetings discussing project. -1- Attach a copy of the following: a Association Bylaws Financial statements for the last two years Association Financial Plan which identifies how both maintenance and operation of the common elements will be paid for and a long -range plan to conduct and finance capital improvements. What is the proposed term of the HIA? 20 years. How do you propose the fee to be charged to the affected property owners? n Equally among all properties I -ii Other: for example — based on unit size, percent interest in association or value. If Other, please identify: Please see attachment for proposed fee structure. Additionally, HOA will be providing $100,000 to this finance package. Amount of loan anticipated: $ 424,900 (estimated) Are there any properties within the HIA which should be exempt from the fee? m No DYes If Yes, please explain: REOUIREMENTS FOR HOUSING IMPROVEMENT AREA (HIA) FINANCING To apply for HIA financing, the owners within the association must agree to the following: 1. Must use City's choice of Bond Counsel and Financial Advisor(s). 2. Disbursements of bond /loan proceeds must be made through an escrow agent to be selected by the City of Lakeville. 3. Payment of an administrative fee to the City of one half percent of the bond issue (if City issues bonds) or flat fee of $5,000, whichever is greater. 4. City staff or its agents will review the performance and level of outstanding debt of previous HIA's before recommending the approval of additional HIA debt. 5. The bond(s) shall be for an issue not less than $250,000, other sources may be used, and the City determines if bonds are to be used. City of Lakeville - 2 - By signing this application you hereby agree to the following: 1. I have read and will abide by all the requirements of the City for taxable bond financing. I will also commit all contractors, subcontractors, and any other major contributors to the project to all segments applicable to them. 2. The above information is true and correct. 3. The Association will pay all costs involved in the legal and fiscal review of this project. These costs include the Bond counsel, Financial Advisor and City Attorney, and all costs involved in the issuance of the bonds to finance the project. 4. I understand that the City reserves the right to deny final approval, regardless of preliminary approve of the application. Signature of Representative / /Josh Walker / Date /_ g P City of Lakeville - 3 - Niakwa 11 Homeowners Association Housing Improvement Area une 2012 Revised Project Name: Housing Improvement Area Niakwa 11 Homeowners Association Document Number / Version Number: 002 Housing Improvement Area Financing Application 1. General Description Built in 1982, the Niakwa Village, 2 Addition, is a unique Lakeville neighbourhood, comprised of 52 quad -style residential units in 13 buildings on Flagstaff Courts North and South. The buildings wear original wood siding by MW Johnson, and though not outdated, the siding now shows considerable wear (peeling surfaces, decomposing panels). In several areas, the siding has failed and allowed water intrusion into the home. The homeowners, through their Association, are requesting the City of Lakeville to classify the area as a Housing Improvement Area and assist them in making needed improvements to their units. In addition to the siding, this project will also address decks that no longer meet current code, as well as replacing any original garage doors and other needed exterior improvements. 2. Goals of the City of Lakeville The physical blight, indicative of the failing siding, places undue financial stress on a fiscally responsible association struggling to meet its homeowners' needs. With new siding, the neighbourhood would be refreshed and considered an upgrade to the city's existing housing stock. The more attractive homes, new updated with energy - efficient wraps and exteriors, will also help increase the owner - occupancy level within the association. 3. Proposed Timeline The following is a proposed timeline, pending accommodation by all parties. • January 31, 2012 — Preliminary application to City of Lakeville • February 20, 2012 — Meeting notice to residents • March 21, 2012 — Resident meeting to discuss project and obtain signatures • April, 2012 — Request public hearing • June 18, 2012 — Initial Public Hearing Scheduled • June August 1, 2012 — Construction start • J0 August 31, 2012 — Construction end 1 June 2012 Author: Anita Tayson Document Status: 2 Revision Improvement Estimated Cost Building Design B Replace siding on 13 buildings $535,000 $422,400 All other costs that are the responsibiility of the association Repair of any underlying structural problems discovered during replacement Replacement of windows 53,500 Replace /repair desks as identified 30,000 Replace /repair concrete steps, pads, as identified 6GTOGG Replace garage doors, as identified 15,000 Replace outdoor lighting (includes electrician fee) 4,000 Replace windows as identified (at homeowner's expense) Improvement Costs Building Design A Building Design B Replacement Siding Actual Costs Actual Costs All other costs that are the responsibiility of the association Assessed evenly among all units Replacement of windows Assessed individually to those residents replacing their windows Project Name: Housing Improvement Area Document Number / Version Number: 002 4. List of Improvements 6. Prior Discussions Niakwa 11 Homeowners Association 5. Reasons Funding Requested Until the current board took office, no thought was given to future improvements that might be needed. The amount of dues was based mainly on routine maintenance and upkeep. The current board, with an eye to future expenditures, has been raising the dues consistently for the past five years to build a reserve to allow for much needed improvements. Despite aggressive savings — foregoing improvements not deemed critical — and a dues increase of 42% overall, the association has been rejected for a bank loan and are years from accruing sufficient funds to pay for the siding project up front. Beginning in 2008, the board saw a need for new siding. At the annual association meeting, this was discussed in length, and the board moved forward with getting bids for residing. However, given the economic downturn and slow recovery, it would a financial improbability for residents to come up with the amount that would be needed to fund this project in its entireity. 7. Fee Structure After much discussion, the following fee structure is proposed: Author: Anita Tayson 1 June 2012 Document Status: 2 Revision 1.00 PURPOSE CITY OF LAKEVILLE HOUSING IMPROVEMENT AREA POLICY 1.01 The purpose of this policy is to establish the City's position relating to the use of Housing Improvement Area (HIA) financing for private housing improvements. This policy shall be used as a guide in processing and reviewing applications requesting HIA financing. The City shall have the option of amending or waiving sections of this policy when determined necessary or appropriate. 2.00 POLICY 2.01 It is the policy of the City of Lakeville to use HIA financing to assist private property owners only in those circumstances in which the proposed private projects address one or more of the following goals: A. To promote neighborhood stabilization and revitalization by the removal of blight and/or the upgrading of the existing housing stock in the neighborhood. B. To correct housing or building code violations as identified by the City Code Enforcement Staff. C. To maintain or obtain FHA mortgage eligibility for a particular condominium or townhome association or single family home within the designated HIA. D. To increase or prevent the loss of the tax base of the City in order to ensure the long -term ability of the City to provide adequate services for its residents. E. To stabilize or increase the owner- occupancy level within a neighborhood or association. F. To meet other uses of public policy, as adopted by the City of Lakeville from time to time, including promotion of quality urban design, quality architectural design, energy conservation, decreasing the capital and operating costs of local government, etc. 3.00 PROCEDURE 3.01 In order to be eligible for HIA financing through the City of Lakeville, the association is to submit a preliminary application and follow the established HIA Approval Process as attached, along with an application fee as set from time to time by resolution of the City Council. All HIA financed through the City of Lakeville should meet the following minimum approved criteria. However, it should not be presumed that a project meeting these criteria would automatically be approved. Meeting these criteria creates no contractual rights on the part of any association. A. The project must be in accordance with the Comprehensive Plan and Zoning Ordinances, or required changes to the Plan and Ordinances must be under active consideration by the City at the time of approval. B. The creation of the HIA and HIA financing shall be provided within applicable state legislative restrictions, debt limit guidelines, and other appropriate financial requirements and policies. C. The project should meet one or more of the goals stated in the Policy section of this document. D. The term of the HIA should be the shortest term possible while still making the annual fee affordable to the association members. The term of any bonds or other debt incurred for the area should mature in 20 years or less. E. The association in a HIA should provide adequate financial guarantees to ensure repayment of the HIA financing and the performance of the administrative requirements of the development agreement. Financial guarantees may include, but are not limited to the pledge of the association's assets including reserves, operating funds and/or property. F. The proposed project, including the use of HIA financing, should be supported by a majority (51 %) of the owners within the association. The association should include the results of a membership vote along with petitions that indicate a 51% owner support to create the area. G. The association must have adopted a financial plan that provides for the association to finance maintenance and operation of the common elements within the association and a long -range plan to conduct and finance capital improvements therein, which does not rely on the subsequent use of the HIA tool. The financial plan must be prepared by an independent third party, with designation as a CAI certified reserve specialist, and must conform to CAI Reserve Study Standards. H. HIA financial assistance is a last resort financing and should not be provided to projects that have the financial feasibility to proceed without the benefit of HIA financing. Evidence that the association has sought other financing for the project should be provided and should include an explanation and verification that an assessment by the association is not feasible along with letters from private lenders or other evidence indicating lack of financing options. I. The homeowner's association must enter into a development agreement, which may include, but is not limited to, the following terms; a. Establishment of a reserve fund b. Staffing requirements c. Annual reporting requirements d. Conditions of disbursement e. Required dues increases f. Notification to new owners of levied fees g. Require multiple bids for project construction J. The improvements financed through the HIA should primarily be exterior improvements and other improvements integral to the operation of the project, e.g. boilers. In the case of a homeowner's association, the improvements should be restricted to common areas. The improvements must be of a permanent nature. The association must have a third party conduct a facility needs assessment to determine and prioritize the scope of improvements. K. HIA financing should not be provided to those projects that fail to meet good public policy criteria as determined by the City Council, including: poor project quality; projects that are not in accord with the Comprehensive Plan, zoning, redevelopment plans and the City policies; projects that provide no significant improvement to the neighborhood and /or the City; and projects that do not provide a significant increase in the tax base and /or prevent the loss of tax base. L. The City Council reserves the right to deny funding for specific improvements if they are determined not to be in keeping with the intent of the policy. M. The financial structure of the project should receive a favorable review by the City's Financial Advisor and Bond Counsel. The review will include a review of performance and level of outstanding debt of previous HIAs. N. The average market value of units in the association should not exceed the maximum home purchase price for existing homes under the State's first time homebuyer program. 4.00 RESPONSIBILITY 4.01 The Community & Economic Development Department shall have primary responsibility for implementation and coordination of this policy. 5.00 AUTHORITY 5.01 The City of Lakeville has the authority to establish HIAs under Minnesota statutes 428A.11 through 428A.21. 5.02 Within the HIA, the City has the authority to: A. Make housing improvements B. Levy fees and assessments C. Issue bonds to pay for improvements 5.03 The City Council has the authority to review each HIA application which includes scope of improvements, association's finances, long -term financial plan, and at least 51% membership support. Date of Approval: , 2011