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Home My WebLink About02-22-11City of Lakeville Economic Development Commission Regular Meeting Agenda Tuesday, February 22, 2011, 4:30 p.m. City Hall, 20195 Holyoke Avenue Lakeville, MN 1. Call meeting to order 2. Approve January 25, 2011 meeting minutes 3. Presentation of 2010 Annual Report 4. Update on Marketing Plan Subcommittee 5. Continued Discussion of Tax Increment Financing Policy 6. Continued Discussion of Business Retention Program Guidelines 7. Director's Report 8. Adjourn Attachments: January, 2011 Building Permit Report January, 2011 Foreclosure Update "The rental market turns around ", StarTribune.com January 27, 2011 CRAFT � City of Lakeville Economic Development Commission Meeting Minutes January 25, 2011 Marion Conference Room, City Hall Members Present: Comms. Matasosky, Brantly, Longie, Tushie, Vlasak, Emond, Smith, Ex- officio member Mayor Mark Bellows, Ex- officio member Chamber of Commerce Executive Director Todd Bornhauser, Ex- officio member City Administrator Steve Mielke. Members Absent: Comms. Schubert, Starfield. Others Present: David Olson, Community & Economic Development Director; Adam Kienberger, Economic Development Specialist; Daryl Morey, Planning Director; Dennis Feller, Finance Director. 1. Call Meeting to Order Chair Matasosky called the meeting to order at 4:35 p.m. in the Marion Conference Room of City Hall, 20195 Holyoke Avenue, Lakeville, Minnesota. 2. Approve November 23, 2010 Meeting Minutes Motion 11.01 Comms. Emond /Smith November 23, 2010 unanimously. moved to approve the minutes of the meeting as presented. Motion carried 3. Election of Officers Chair Matasosky solicited nominations for the positions of Chair, Vice Chair and Secretary of the EDC. Motion 11.02 Comms. Smith / Emond moved to renew the existing officers of the EDC for 2011 as follows: Chair, Jack Matasosky, Vice Chair, Gary Tushie, Secretary, Bob Brantly. Motion carried unanimously. Steve Mielke noted that the City Council is proposing to shift the appointment of nominees to the various boards and commissions to the first quarter of the year instead of the end of the calendar year. 4. Discussion of Office Park (OP) Zoning District Uses David Olson introduced the EDC memo outlining the Office Park (OP) zoning district. Economic Development Commission Meeting Minutes January 25, 2011 Daryl Morey reviewed the EDC memo and gave a history of the evolution of the allowed uses within OP zoning district formerly the Corporate Campus (CC) and Commercial Warehousing (C -W) zoning district. New Morning Windows, which is located in the Fairfield Business Campus, was recently listed for sale. An issue has been raised that the zoning of the Fairfield Business Campus no longer allows manufacturing as a conditional use. Fairfield Business Campus is zoned OP, Office Park District. Chair Matasosky indicated that the EDC wasn't aware that the manufacturing use was removed when the CC district was converted to the newly created OP district. He added that it was important to make the affected businesses aware of the change. Mr. Morey stated that manufacturing was previously allowed as a conditional use (CUP) in the CC district. CUP's run with the property and are not tied to individual businesses. Comm. Emond asked if a new business occupied the New Morning Windows property that was not a manufacturing business, would a business.somewhere down the road be able to go back to utilize the existing CUP for the property to begin manufacturing again. Mr. Morey responded that he would follow up with the City Attorney to address that question. [Lakeville City Attorney Roger Knutson has responded with his opinion that under section 11 -15 -3D of Lakeville City Code the CUP on the property would expire if it was not utilized for more than a year.] Mr. Mielke mentioned that one approach to providing for manufacturing in the OP district would be to try to differentiate between "smokestacks" and "clean" manufacturing types of businesses. Ex- officio member Bornhauser asked if the former CC district was the only area of Lakeville affected by this change. Mr. Mielke responded that the area just south of the Fairfield Business Campus was previously zoned CW and is now a part of the new OP district. Comm. Tushie stated that heavy manufacturing doesn't belong in an office park setting. Some cities have used the presence of loading docks or a calculation related to floor space dedicated to manufacturing to separate types of manufacturing that is allowed in office parks. Mr. Olson reviewed a handout outlining the changes in the OP zoning district that was used throughout the zoning ordinance amendment process last year. Mr. Mielke concluded the discussion by stating that the issue will be discussed by the Planning Commission at a future meeting and all businesses potentially 2 Economic Development Commission Meeting Minutes January 25, 2011 impacted by these changes will be notified so that they can be included in the public review process. 5. Presentation of a Summary of Existing and Previous Tax Increment Financing (TIF) Districts in the City of Lakeville Mr. Olson reviewed the EDC memo outlining the historical use of TIF in Lakeville. Dennis Feller reviewed each of the existing TIF districts along with their original intentions and then outlined the outcomes and impacts of each district. Chair Matasosky commented that the report reflected a good demonstration on the City's return on investment of this economic development tool. 6. Update on Marketing Plan Initiative Adam Kienberger reviewed EDC memo and recapped the meeting of the Marketing Subcommittee. Mr. Kienberger noted that the Community Development Block Grant (CDBG) program is being utilized to fund the initial marketing plan development. It is proposed that an RFP for a marketing consultant be developed by the Subcommittee. It was also the recommendation of the Subcommittee to have the EDC appoint Clinton Kennedy as the fourth member of the Subcommittee. Several Commissioners complimented a short video City staff had produced the past spring for the Google Fiber application. It was requested that a link to the video be shared with the rest of the EDC as an example of a method the City can use to market itself. Motion 11.02 Comms. Tushie /Emond moved to appoint Lakeville resident Clinton Kennedy to the EDC's Marketing Subcommittee and move forward with the marketing initiative as outlined at the meeting. Motion carried unanimously. 7. Presentation on Proposal from WebQA Mr. Olson reviewed the EDC memo outlining a proposal the City has received from a company called to WebQA to partner with the City to produce a value -added business directory as part of the City's website. The directory would offer Lakeville businesses an opportunity to have a presence on the City's website while allowing them to create a "micro- site" to offer coupons, business links, and other value -added features. The proposal would be part of a three -year contract with the City for no fee in exchange for the company to solicit web - advertisements from local businesses to be included on the WebQA portion of the business directory website. Ten percent of the revenues of the advertisement sales would be shared with the City of Lakeville. 3 Economic Development Commission Meeting Minutes January 25, 2011 Comm. Longie expressed concern over the proposal and inquired as how the service would be able to pay for itself. Ex- officio member Bornhauser stated that while it looks like great software, it's not cheap software, and also wondered how the company would be able to make any money. It was also discussed how the City should partner more with the Lakeville Area Chamber of Commerce and include an easier to find link on the City website linking to the Chamber. Ex- officio member Bornhauser further stated that the Chamber could work with the City to do something similar to what WebQA is proposing. However, it would likely be limited to including only Lakeville Area Chamber of Commerce members. It would also be a burden to the business community to have another company like WebQA soliciting them for advertisement dollars. Comm. Longie expressed support of additional Chamber partnership and analyzing this type of venture as a component of the newly developing marketing plan. Mr. Olson noted that this no -fee offer may not be available in the future if the EDC decides to pursue this proposal in several months as part of the new marketing plan. Comm. Brantly asked if the Chamber were to do a similar type of directory, would it be used to solicit new Chamber members? Ex- officio member Bornhauser stated that yes it would be a tool to help increase Chamber membership. Vice chair Tushie stated that the proposal sounded like a good idea and should be a part of the City's marketing plan. It should also be something that includes all Lakeville businesses and not just Lakeville Area Chamber of Commerce members. Concluding the discussion, the EDC decided to not move forward with the WebQA proposal at this time, but rather assess how it would fit into the City's overall marketing plan. 8. Discussion of Spotlight on Business and Other Business Retention Efforts Mr. Olson reviewed the EDC memo regarding the Community and Economic Development Department's business retention and expansion programs and efforts. Mr. Olson sought input as to if staff should re- feature businesses that have been been Spotlighted in the past as a part of the Spotlight on Business program. Should the program be shifted to include smaller or more commercial /retail types of businesses? Comm. Longie asked if there was existing criteria as to how businesses are chosen for the Spotlight program M Economic Development Commission Meeting Minutes January 25, 2011 Mr. Olson responded that it has been past practice to feature businesses that are major employers. The original goal of the Spotlight on Business program was to communicate to the community the benefits of having a strong business community. Comm. Smith noted that it is often challenging to select a business to feature for the program as many have already been included in the past. Mayor Bellows noted that he would like to open up to the businesses and provide them an opportunity at City Council meetings to have the Council listen to how they be more business - friendly. Comm. Smith noted that the program has traditionally featured successful businesses and would caution shifting the program to become more negatively focused on business's complaints or issues with the City. Vice Chair Tushie added that this would be a different type of forum traditionally offered by the Spotlight on Business program. The Spotlight on Business program has historically focused on highlighting good stories from the Lakeville business community and celebrating those successes. Vice Chair Tushie suggested making the Spotlight on Business program more geographically based for a period of time. For example, in 2011 Downtown businesses could be the main focus; maybe work with the Downtown Lakeville Business Association (DLBA) on this. Chair Matasosky suggested engaging EDC members for more suggestions for the program so that staff doesn't have to arbitrarily choose a business to feature each time. Comm. Longie suggested working with the Lakeville Area Chamber of Commerce on partnering with them on their business visits. It was noted that each type of business retention program the City utilizes tends to have a slightly different focus (Spotlight on Business, Business Retention visits, Out & About cable TV segment). Mr. Olson concluded the discussion by stating that staff will begin to develop some criteria for each program and bring it back to the EDC at a future meeting. 9. Director's Report Mr. Olson reviewed the Director's Report. Mayor Bellows stated that the City Council is considering formulating a Financial Advisory Task Force or Committee to review City budget documents and provide input on the City budget process. 5 Economic Development Commission Meeting Minutes January 25, 2011 Mayor Bellows continued by asking the EDC for suggestions on people who might be willing to be a part of this "research team" to advise the City Council on budget matters. Mayor Bellows concluded by stating that as a part of the budget reduction efforts, $5,000 has been eliminated for a City Council facilitator to guide a strategic planning process. He asked the EDC if they had any suggestions on someone within the community who may be able to facilitate a City Council strategic planning process at no cost. Several EDC members noted that when Bob Vogel was on the EDC, he served as the EDC's facilitator for their strategic planning process several times. 10.Adjourn Chair Matasosky adjourned the meeting at 6:40 p.m. Respectfully submitted by: Attested to: Adam Kienberger, Economic Development Specialist R. T. Brantly, Secretary 2 C , , �i 2010 Economic Development Annual Report Cit f 2010 Development Total Permit Valuation $54,308,186 $72,782,473 in 200• '} City o /_�C:'.'4i. 2010 Residential Development 140 units 174 in 2009 Permit Valuation = $38,718,000 $41, 010, 000 i n 2009 city .4 2010 Residential Development 129 Single Family units 126 in 2009 a 11 Townhomes units 48 in 2009 P y man 1" —` City of 2010 Residential Development Dakota County Community Development Agency — Meadowlark Townhomes 40 workforce housing units Opened Fall 2010 �L'` Y.I. iii - AL Ciryuf -I% Metro Housing Permits Comparison (2010) Maple Grove Blaine Woodbury Shakopee Lakeville Plymouth Prior Lake F. ington Chanhassen Andover 0 50 100 150 200 250 300 2010 Housing Permits Scarce: Haysrorp Repwl eM Llry of Blalne City of Metro Housing Units Comparison (2010) Woodbury Blaine Maple G rove Bloomington Apple V alley Shakopee Minnetonka Lakeville Plymouth Forest Lake 0 100 200 300 400 500 600 2010 Housing Units Source: Neysfwre Report and Clry of BlNlre City ot4& Metro Housing Units Comparison (2001 -2010) Blaine Woodbury Lakeville Shakopee Maple Grove Plymouth Brooklyn Park Eden Prairie Apple Valley Farmington 0 1,000 2,000 3,000 4,000 5,000 6,000 2001 -2010 Housing Units sou�a Ne,Smne Rapm artd aydaame Y r cily .1 Dakota County Residential Permit Value Comparison (total 2001 -2010) Lakeville Rosemount Farmington Inver Grove Heights Apple Valley Eagan Hastings Burnsville 0 200 400 600 800 1,000 1,200 2001 -2010 Total Value (in $millions) City ot.. " 2010 Development ■ Commercial & Industrial • Permit Valuation = $3,742,000 $7,339,500 C/I valuation in 2009 • Tax Exempt Projects = $516,000 $8,267,000 in 2009 City oL 2010 Corporate Campus Development ffi Malt -O -Meal Building renovation /expansion Converted previous warehouse space to 18,000 square feet of two -story office space Will be able to add up to 100 more jobs T 1 M A iit City oS " ) 2010 Commercial Development ! Lakeville Orthodontics Built a new 4,400 square foot dental office 1 City o/ 2010 Commercial Development Sawa Japan Steakhouse & Sushi Club House Child Care & Preschool Dollar Tree Miller Comfort Dental Last remaining space filled in Argonne Village a t Cil Permit Comparison ■ Commercial ❑ Industrial 40 35 30 Valuation of 25 Permits in 20 Millions 15 10 5 0 o o` o� o'` o� oq ti° d o�o�o�o d o l �o d o d o Year City 0,4 Dakota County C/l Permit Value Comparison (total 2001 -2010) Lakeville Burnsville Eagan Apple Valley Inver Grove Heights Rosemount Hastings Farmington Pi i i i i 0 50 100 150 200 250 300 350 2001 -2010 Total Value (in $millions) _.... City of 2010 Business Expansions ■ While not as many building expansions in 2010, there were many companies that grew and expanded their workforce • Despatch Industries • ImageTrend • ConAgra Foods • Ryt -way Industries • Imperial Plastics • Up North Trading Company • Grain Handler �� ■ EDC Initiatives ■ Manufacturers Appreciation Reception ■ Business Retention Program ■ Spotlight on Business Program 2011 -2013 Strategic Plan for Economic Development City or .Q EDC Initiatives (cont,) ■ Completion and approval of the 2011 -2013 Strategic Plan for Economic Development Approved by City Council on December 6, 2010 The Strategic Plan continues a tradition of thoughtful and organized planning for the economic future of Lakeville Incorporates four main goals for the next three years CrtY n9_`T� EDC Initiatives Create a marketing plan that has a clear message, is flexible, adequately funded, creative, aggressive, and targeted that communicates Lakeville's values, is broad and sector specific based on good information 2 Create a toolbox of incentives Gay .4 EDC Initiatives a Advocate for: Better access to 1 -35 Third lane southbound to County Road 50 East -west corridor connections Airlake Airport runway extension Sufficient transit funding but not at the expense of other transportation goals EDC Initiatives Monitor and encourage: Expanded telecommunication services Better regulatory environment Remain in the lower 1/3 tax rates for City property taxes in Dakota County More State funding for the development of workforce housing City nt �,;@`;.dl`u A Challenging Environment ■ Lakeville was not immune to the recession and the past couple of years were difficult for many businesses and residents - Drywall Supply Perma- Groove Pinnacle Products DHY Berry Plastics Univar Century Refining A Strong Future Brisk start to 2011 2 senior living projects Kingsley Shores Hosanna! /Ebenezer Senior Housing Walmart Industrial /distribution /manufacturing prospects Local business expansions of Lakevill 2010 Economic Development Annual Report , No, City of Lakeville =� Community and Economic Development Memorandum To: Economic Development Commission From: Adam Kienberger, Economic Development Specialist Copy: Steven Mielke, City Administrator David L. Olson, Community & Economic Development Director Date: February 22, 2011 Subject: Update on Marketing Plan Initiative On Thursday, February 3r the EDC's Marketing Subcommittee (Matasosky, Brantly, Longie, and newly appointed Clinton Kennedy) met to discuss how to pursue the first goal of the 2011 -2013 Strategic Plan for Economic Development: "Create a marketing plan that has a clear message, is flexible, adequately funded, creative, aggressive, and targeted that communicates Lakeville s values, is broad and sector specific based on good information. " Several other out -of -state marketing initiatives were reviewed (State of Texas, Kansas City, Missouri, Mason, Ohio) and a general strategy on how to move forward was discussed. The Subcommittee discussed how much attention should be focused on conducting a 'market study" as a part of the of overall marketing plan. It was concluded that a market study to determine who a marketing plan would target should be incorporated as either a separate component of the marketing initiative or within a single RFP for developing a marketing plan. A preliminary timeline was also established to give the Subcommittee a sense of when specific goals related to the development of a marketing plan could expect to be be accomplished. It was initially determined that the coordination of an RFP or RFP's for a marketing plan and marketing study would likely run through late spring into summer and that a final marketing plan would likely be completed sometime before the end of 2011. This would segue into a strategy for implementation in 2012. The Subcommittee will proceed by continuing to outline desired outcomes of the process and structure the outline for an RFP or RFP's to hire a marketing consultant to develop a marketing plan /study. They will continue to meet approximately twice per month and check in with the entire EDC at regular intervals to inform them of their progress and seek input as needed. Action Requested: None. This memo is provided as an update to the EDC on the activities of the Marketing Subcommittee. ,a No. City of Lakeville Community and Economic Development Memorandum To: Economic Development Commission Steven Mielke, City Administrator From: David L. Olson, Community & Economic Development Director Copy: Adam Kienberger, Economic Development Specialist Date: February 18, 2011 Subject: Review of Draft Tax Increment Financing Policy The EDC has discussed the issue of the City's Business Subsidy Policy during several meetings in 2010. Attached is a revised Business Subsidy Policy that was recommended to the City Council at their April 27, 2011. The City Council reviewed this policy at its July 26, 2011 Work Session with several EDC members in attendance. A copy of the minutes from this Council Work Session are attached. Further work on developing policies for specific business assistance tools was put on hold while the new Strategic Plan for Economic Development was being prepared in the second half of 2010. One of the goals in the approved Strategic Plan for Economic Development that was approved by the City Council in December is the creation of a toolbox of incentives. The most commonly incentive tool utilized by cities is Tax Increment Financing (TIF). Staff provided an overview at the January meeting of the EDC on the history of the use of this financing tool in Lakeville. Attached is a Draft TIF Policy for the EDC's consideration. It attempts to include the objectives that were included in the Draft Business Subsidy Policy dated April 2010 that was reviewed by the City Council last July. The City has received a number of requests since the first of the year for information on what, if any, incentives the City is willing to consider for industrial park projects. These projects range in size from 160,000 to 500,000 square feet in size and include both manufacturing as well as warehouse distribution center type projects. The number of jobs range from 25- 35 for a distribution center to 100 -200 for a manufacturing business. It is my opinion that if we are going to compete for some or all of these types of projects, the City will have to consider the use of Tax Increment Financing. Action Requested: Staff is requesting comments and feedback on the attached proposed TIF Policy. City Council Work Session Minutes July 26, 2010 Page 2- am O'Connell presented the Implementation Plan update and gave a detailed overview of th revisions that have been made to the original plan that was drafted in 2004. The UPA and mprehensive Plans have helped to project needs and direct the plan to where it is now. It i nticipated that several items will fluctuate before the transit stations are operational; wever, several major considerations were given to the functionality of the facilities. Rider ip projections are based on a model but are difficult to accurately forecast as are the future ne s of the residential and business communities in the BRT corridor. Stakeholders have exp sed they want transit services that are fast, easy, and reliable. Twc walk -up station locations a been added to the plans at 161st Street and Glacier Way to serve the local neighborhoods d businesses. At the completion of the project in 201 rovided there is adequate ridership, there will be a direct connection from Lakeville into dow wn Minneapolis. There will be many BRT special service potentials other than commuting work, such as trips to special events, shopping, and Target Field. Council members aske bout an east -west transportation plan that would move riders from the 35W station to Apple ey then to downtown St. Paul. a The 30-day comment period for the Regional Railroad Auth will end on August 13` and if they feel comfortable may adopt this plan on August 24 A fi document with then be available by September 1 for adoption by Lakeville City Council. Th an will then be forwarded to the State and the Federal offices for their final review and app al. This item will be placed on an upcoming Council agenda for formal approval. ITEM #2 — Business Assistance Policy Dave Olson introduced EDC members Jack Matasosky, Sheila Longie and Gary Tushie. At the April 27, 2010 Economic Development Commission meeting an update to the 2003 business subsidy policy was discussed and a recommendation was made to bring a revised policy to City Council for consideration. A revised policy would establish criteria and give staff direction to answer inquiries regarding the availability of assistance for businesses that are considering locating in Lakeville. The draft policy recommended by the EDC includes a provision referred to as the "but for" which indicates that the project would not be possible without assistance from the City. The EDC is recommending seven criteria need to be met by the business to qualify for assistance: 1. Creation of new jobs in the community with a minimum wage equal to that of programs administered by MnDEED. 2. Provide value in the form of needed transportation or utility infrastructure. 3. Redevelopment projects that stabilize or improve neighborhoods. 4. Projects that increase the economic diversity in business and industry. 5. Enhance the quality of life for Lakeville residents. 6. Retention of existing jobs, such as expansion of an existing business. 7. Projects that address a community need or provide a public benefit. City Council Work Session Minutes July 26, 2010 Page 3- State statutes require that a policy be adopted. Administering the subsidy program requires public hearings and other provisions. Two of the most common subsidy tools are Tax Increment Financing (TIF) and tax abatement however there are no current policies in place for these specifically. Council has also adopted a policy on private activity bond issuance when Highview Hills was being built. At Council's direction, this will be placed on a future agenda to be followed by further discussions on the strategic planning process. Commissioner Matasosky believes the most important aspect of the policy is to give City staff a'toolbox" of options and opportunities to share with existing and new businesses and to keep Lakeville competitive with outstate and out of state businesses. He would like to see an ROI study to forecast how the potential assistance would impact the community. Commissioner Longie stated that her focus would be on retention of existing businesses, especially those that are currently financially insecure due to the economic downturn. Commissioner Tushie recalled discussions of 20 years ago regarding how to best help the city to progress and at that time the need was for upscale housing for the owners and top executives of the businesses. As the times have changed, surrounding communities are more built out and Lakeville still has a lot of undeveloped land that can provide a tool for the city to grow. Infrastructure is a major component of growth and needs to be considered. Steve Mielke stated that not all assistance is of a financial nature. This policy will give staff the opportunity and the guidelines to have a conversation with potential Lakeville businesses to determine if some assistance could affect their decision of where to locate. The question should not only be What can the City do for the business, but also What can the business do for the community. In response to Council's questions, the EDC would like to maintain flexibility and try to distinguish Lakeville from other communities and capitalize on the City's amenities. #3 — Service Prioritization Discussion At t 'r March work session Council discussed various tools that would help in the budget decision aking process. One of the tools is the recently completed community survey, another is th o-year budget, and other is to prioritize various city services. This model started in Jefferso ounty, Colorado several years ago to assist with fiscal management. The City of St. Cloud has us this model to apply standards to provide an objective outcome to the budget and has promote ' at the League of Minnesota Cities Conference. The prioritization method breaks servic into two components - internal (organization) and external (public services). Staff has identifie nd established eight criteria for the external services. Each of those eight categories was giv a numerical ranking; they were then sorted in order of highest to lowest priority based on a number of points. The eight categories were: April, 2010 DRAFT CITY OF LAKEVILLE BUSINESS SUBSIDY POLICY This Policy is adopted for purposes of the Business Subsidies Act (the "Act "), Minnesota Statues, Sections 1163.993 through 116).995. Terms used in this Policy are intended to have the same meanings as if used in the Act, and this Policy shall apply only with respect to "subsidies" as defined by the Act if and to the extend required thereby. The City of Lakeville and the Lakeville Economic Development Commission maintain several policy documents which speak to the general goals and objectives for the provision of public assistance for private development or redevelopment activities. These documents include, but are not limited to the current Strategic Plan for Economic Development and the Private Activity Bond Issuance Policy. The City of Lakeville has determined that in order for any project to be considered for financial assistance, a finding is needed that determines that, "but for" the City's assistance, this project will not occur or will not occur within a reasonable amount of time. The City will also need to demonstrate a return on its investment based on one or more of the public benefit categories listed in this Policy. Because projects vary greatly in structure and public benefit derived, each project will be considered on its own merits. Consideration will be given to projects providing public benefits in one or more of the following categories: 1. The creation of new jobs /increase in total payroll. In the case of new job creation, new jobs must pay an average wage equal to the minimum wage level for business assistance programs administered by the Minnesota Department of Employment and Economic Development for cities located in the seven county metropolitan area (currently $13.00 per hour). Preference will be given to higher paying jobs that also provide benefits such as health care coverage. 2. Projects that provide value in the forms of needed transportation and other utility infrastructure improvements in the community that would be completed in conjunction with the project. 3. Redevelopment projects that result in the stabilization of business districts or neighborhoods by elimination of blighting conditions. 4. Projects that enhance or increase the economic diversity of the community by attracting businesses or industries not currently located in the City. New job wage requirements will apply to any new jobs created. 5. Quality of Life based on business /projects. Those business /entities that provide a desirable good or service and address an unmet demand in the community will be considered. New job wage requirements will apply to any new jobs created. 6. Retention of existing jobs. To be considered under this category, it must be demonstrated — to the satisfaction of the City - that the loss of jobs is specific and can be demonstrated. 7. If a particular project does not involve the creation of jobs, but is nonetheless found to meet another public purpose of the City it may be considered without any specific job wage goals, as permitted by Minnesota Statutes. This public purpose has to be something other than an increase to the City's tax base. Other measurable, specific and tangible goals must be established. Examples of tangible goals may include redevelopment or clean -up of a contaminated site or increased tourism. Each project shall not only be evaluated against the Business Subsidy Policy but also against other applicable City of Lakeville or Economic Development Commission policies, including the Comprehensive Guide Plan, current Strategic Plan for Economic Development and Private Activity Bond Issuance Policy. The level of assistance to be provided for any project is at the discretion of City of Lakeville. Because it is not possible to anticipate every type of project which may in its context and time present desirable community building or preservation goals and objectives, the governing body must retain the right in its discretion to approve projects and subsidies which may vary from the principles and criteria of this Policy. The burden will be on the applicant to demonstrate, to the satisfaction of the City of Lakeville, that the public benefit justifies the requested subsidy. In all cases of business subsidy, where the subsidy is equal to or greater than the threshold prescribed in Minnesota Statutes, a subsidy agreement will be entered into between the City and the recipient. This agreement will delineate the subsidy structure and amount, as well as the expected public benefit. The agreement will include provisions for repayment and other resolution options if the expected public benefit is not achieved. All business subsidies will be subject to the criteria outlined in Minnesota Statutes, Section 1163.933 through Section 1163.955 except those subsidies as exempted by same. CITY OF LAKEVILLE TAX INCREMENT FINANCING POLICY A. POLICY PURPOSE For the purposes of this document, the term "City "shall include the Lakeville City Council. The purpose of this policy is to establish the City of Lakeville's position relating to the use of Tax Increment Financing (TIF) for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax increment assistance. The fundamental purpose of tax increment financing in the City of Lakeville is to encourage desirable development or redevelopment that would not otherwise occur but forthe assistance provided through TIF. The City of Lakeville is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. It is the intent of the City to provide the minimum amount of TIF at the shortest term required for the project to proceed. The City reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of business assistance to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. The City Council can deviate from this policy for projects that supersede the objectives identified herein. B. OBJECTIVES OF TAX INCREMENT FINANCING Tax Increment Financing (TIF) uses the increased property taxes generated by new real estate development within a tax increment district to pay for certain eligible costs associated with the development. As a matter of adopted policy, the City will consider using TIF to assist private development projects that will achieve one or more of the following objectives: 1. To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits. Preference will be given to higher paying jobs that also provide benefits such as health care coverage. • Projects that provide value in the forms of needed transportation and other utility infrastructure improvement that would be completed in conjunction with the project. • To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off" development. • To facilitate the development process and to achieve development on sites which would not otherwise be developed but /for the use of TIF. • To remove blight and /or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. • To offset increased costs of redevelopment (i.e. contaminated site clean up) over and above the costs normally incurred in development. To create opportunities for affordable housing. • Projects that improve the quality of life in the City by providing a desirable good or service and address an unmet demand in the community. • To contribute to the implementation of other public policies, as adopted by the city from time to time, such as the promotion of quality urban or architectural design, energy conservation, and decreasing capital and /or operating costs of local government. C. POLICIES FOR THE USE OF TIF 1. When possible, TIF shall be used to finance public improvements associated with the project. The priority for the use of TIF funds is: a. Public improvements, legal, administrative, and engineering costs. b. Site preparation, site improvement, land purchase, demolition, and environmental remediation. c. Capitalized interest, bonding costs. 2. The following types of TIF districts may be established: a. Economic Development Districts (maximum term 9 years) b. Redevelopment Districts (maximum term 26 years) c. Housing Districts (maximum term 26 years) d. Renewal and Renovation Districts (maximum term 16 years) Other types of TIF districts, along with specific criteria, may be considered on a case by case basis. e. TIF assistance shall not be provided for reimbursement of land and /or property price that is in excess of fair market value. An appraisal by a third party, agreed upon by the City and Developer, will determine the fair market value of the land. f. A maximum of ten percent (10 %) of any tax increment received from the district shall be retained by the City to reimburse administrative costs. g. Only for a project which significantly supersedes the objectives identified herein, will the term of the TIF assistance exceed 15 years. h. Any developer receiving TIF assistance shall provide a minimum of twenty percent (20 %) cash equity investment in the project. The assistance shall not be used to supplant cash equity. i. TIF shall not be used in circumstances where land and /or property price is in excess of fair market value. An appraisal by a third party, agreed upon by the City and Developer, will determine the fair market value of the land. j. Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. k. TIF shall not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the City. I. TIF shall not be provided for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. m. The developer must provide adequate financial guarantees to ensure completion of the project, including, but not limited to: assessment agreements, letters of credit, personal guaranties, etc. n. The developer shall adequately demonstrate, to the City's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. o. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the City or its consultants. D. PROJECT QUALIFICATIONS All TIF projects considered by the City of Lakeville must meet a//of the following requirements: 1. To be eligible for TIF, a project shall result in: a. For Economic Development TIF Districts, new construction of a minimum of 5,000 square feet; b. For Economic Development TIF Districts, the minimum creation of one new or retained full time job per $27,000 of TIF provided; c. For Redevelopment TIF Districts, a minimum value increase of $200,000 or not less than 2 times the current year assessed value, whichever is greater; and, 2. The project shall meet at least one of the objectives set forth in Section B. 3. The developer shall demonstrate that the project is not financially feasible but - forthe use of TIF. 4. The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. 5. The project shall serve at least two of the following public purposes: • Creation of jobs with livable wages and benefits, per City's Business Subsidy Policy. • Increase of tax base. • Enhancement or diversification of the city's economic base. • Industrial development that will spur additional private investment in the area. • The project contributes to the fulfillment of the City's development or redevelopment objectives. • Removal of blight or the rehabilitation of a high profile or priority downtown site. E. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers /businesses receiving tax increment financing assistance from the City of Lakeville shall be subject to the provisions and requirements set forth by state statute 1163.993 and summarized below. All developers /businesses receiving TIF assistance shall enter into a subsidyagreementwith the City of Lakeville that identifies: the reason for the subsidy, the public purpose served by the subsidy, and the goals for the subsidy, as well as other criteria set forth by statute 1163.993. The developer /business shall file a report annually for two years after the date the benefit is received or until all goals set forth in the application and performance agreement have been meet, whichever is later. Reports shall be completed using the format drafted by the State of Minnesota and shall be filed with the City of Lakeville no later than March 1 of each year for the previous calendar year. Businesses fulfilling job creation requirements must file a report to that effect with the city within 30 days of meeting the requirements. The developer /business owner shall maintain and operate its facility at the site where TIF assistance is used for a period of five years after the benefit is received. The developer /business will be required to attain or exceed the jobs and wages goals set forth in the Subsidy Agreement. Developers / Businesses failing to comply with the above provisions will be subject to fines, repayment requirements, and be deemed ineligible by the State of Minnesota to receive any loans or grants from public entities for a period of five years. F. APPLICATION PROCESS 1. Applicant submits the completed application along with a nonrefundable initial application fee of $500. a. City staff reviews the application and completes the Application Review Worksheet. b. Results of the Worksheet are submitted to the appropriate governing authorities for preliminary approval of the proposal. 2. If preliminary approval is granted, the applicant submits the final application fee of $5,500 and the Tax Increment Financing Plan, along with all necessary notices, resolutions and certificates are prepared by City staff and /or consultants. a. Notices are published and sent to the county and school board b. Public hearing(s) on the proposed project are held. c. The City Council grants final approval or denial of the proposal. EXHIBIT A REQUEST FOR FINANCIAL ASSISTANCE PROJECT: Business Name: Address:_ Telephone: Contact: Brief description of the Business: Present ownership of the site: Proposed project: Building square footage, size of property, description of buildings — materials, etc. Total Estimated Project Costs: a. Land Acquisition b. Site Development c. Building Cost d. Soft Costs e. Financing Costs f. Contingencies Total $ $ $ $ $ $ $ Estimated Project Costs Eligible for TIF Assistance (i.e. Acquisition, Demolition, Site Improvements, Utilities, Streets): a. $ b. $ C. $ d. $ Total $ PLEASE SUBMIT PROJECT PROFORMAS SHOWING NEED FOR ASSISTANCE (I.E. WITH ASSISTANCE AND WITHOUT). Total Estimated Market Value at completion: Estimated real estate taxes upon completion: Source of Financing a. Equity $ b. Bank Loan $ c. TIF (Gap) $ Total $ Amount of Assistance (Estimated Gap): Type of Assistance Requested (Upfront or Pay -as- you -go) Name & Address of architect, engineer, and general contractor: Project construction schedule: a. Construction Start Date b. Construction Completion Date c. If phased project: Year % Complete Year % Complete State specific reasons why assistance is necessary for the project (the "but for" test). Please indicate how the project would meet one or more of the following: Economic Development goals; creation of jobs that pay wages adequate to support households, job retention, or tax base expansion. Municipal Reference (if applicable). Please name any other municipalities wherein the applicant, or other corporations the applicant has been involved with, has completed developments within the last five years. Additional Comments: Submit this form along with an initial $500 nonrefundable application fee. An additional fee of $5,500 will need to be submitted should the request for assistance proceed. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation. All personal financial information will be kept private and confidential. ❑ 1. Written business plan or a description of the business, ownership/ management, date established, products and services, and future plans. ❑ 2. Two year financial projections, or if housing project, or leased space, include a 10 -year operating pro- forma. ❑ 3. Letter of commitment from other sources of financing, stating terms and conditions of their participation in the project. ❑ 4. Initial nonrefundable application fee of $500, with a $5,500 fee to follow should the request for assistance proceed. In addition to defraying the cost of staff time, the fee will be used to pay costs associated with processing this request for financial assistance such as legal, engineering and financial analysis. The City reserves the right to stop the processing of the request until additional fees are paid should the original amount be insufficient to pay such costs. That portion which remains unspent, if any, will be returned only if the project is denied approval. ❑ 5. Attach the following documentation: Part 1— Corporation /Partnership Description Part 2 — List of Shareholders /Partners Part 3 — Description of Project Part 4 — But For Analysis Part 5 — List of Prospective Lessees Part 6 — Legal Description, Property Identification Numbers, maps of the project area, and project renderings Part 7 — Public Purpose Narrative Part 8 — Sources & Uses of Funds — Additional Information The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the City of Lakeville to check credit references, verify financial and other information, and share this information with other political subdivisions as needed. The undersigned also agrees to provide any additional information as may be requested by the City after the filing of this application. Applicant Name Date By Its City of Lakeville Community and Economic Development Memorandum To: Economic Development Commission From: Adam Kienberger, Economic Development Specialist Copy: Steven Mielke, City Administrator David L. Olson, Community & Economic Development Director Date: February 22, 2011 Subject: Business Retention Program Guidelines At the last EDC meeting we discussed the various business retention programs the City utilizes as part of an overall business retention and expansion (BR &E) strategy. Direction was given to outline some guidelines for selecting business participants in both the Spotlight on Business program and the Business Visit program. The Spotlight on Business program has targeted many of the top employers in Lakeville over the past several years and recognized them for being a valued member of the Lakeville business community. One option for the program would be to shift the focus solely to new businesses within the community (regardless of size or classification). This would serve a dual function of both establishing an initial relationship with the business and offering a public welcome by the City Council. Even if the business declines to be Spotlighted, the intention of the program is still met and a contact is established. Staff can identify new businesses by building permit activity, EDC input, and other anecdotal information. A second option would be to target a specific geographic location of the City and Spotlight businesses within that area (i.e. Downtown /Fairfield Business Campus /Southfork Shopping Center). This option could also be shifted to a specific industry instead of geography (i.e. banks /restaurants /hotels etc.). The Business Visit program is a more targeted program designed to build and strengthen relationships with businesses in Lakeville. Staff recommends strategically identifying businesses to meet with throughout the year. This program provides flexibility in meeting with different types of businesses not necessarily covered by the City's other BR &E efforts. This flexibility will allow the visits to benefit businesses that may have a more immediate need (i.e. planned expansion /workforce concerns etc.). Staff will assist in identifying businesses that should be visited as well as solicit recommendations from the EDC. Action Requested: Staff is seeking input on the suggested business retention program guidelines outlined above. 0 City of Lakeville Community and Economic Development v Memorandum To: Economic Development Commission From: David L. Olson, Community and Economic Development Director Copy: Steve Mielke, City Administrator Adam Kienberger, Economic Development Specialist Date: February 18, 2011 Subject: February Director's Report The following is the Director's Report for February, 2011. Building Permit Report The City issued building permits with a total valuation of $1,872,556 in January. This compares to a total valuation of $2,169,800 in during January of 2010. The City issued commercial and industrial permits with a total valuation of $53,000 in January compared to a total valuation of $32,000 during January of 2010. The City also issued permits for 5 single family homes in January with a total valuation of $1,558,000. This compares to 6 single family home permits in January of 2010 with a total valuation of $1,517,000. Development Update Senior Housing Projects: The Planning Commission at their February 17 meeting recommended approval of the two senior housing projects currently proposed in Lakeville. Kingsley Shores is 101 unit senior housing project that is proposed adjacent to the Chart House Restaurant. The other is a 93 unit senior housing project that would be constructed adjacent to and connected to Hosanna! Church. Both projects are seeking housing revenue bond financing from the Dakota County CDA. The City Council is scheduled to consider both of these projects at their March 7, 2011 Meeting. Pizza Ranch: The City recently issued a building permit for the Pizza Ranch that is going in the multi- tenant building in front of HOM Furniture. This project was approved by the City Council last August however it took this long for them to obtain their financing which includes a SBA loan. Malt -O -Meal Expansion: The Planning Commission at their February 17 meeting recommended approval of a consent by the City to allow Malt -O -Meal to expand their parking lot as well as possibly construct a second building on property they acquired from New Morning Windows in 2009 that contains a conservation easement. In exchange, Malt -O -Meal has agreed to provide an increased landscaped buffer between the single family homes to the north. This increased buffer will include the planting of 20 foot tall White Pines along their entire northerly portion of their property. They have also agreed to limit the height of any future buildings to two stories. The City Council is scheduled to consider this matter at their March 21, 2011 meeting. Foreclosure Update Attached is a copy of the January Foreclosure Update from the Dakota County CDA. There were 19 Sheriff Sales in Lakeville during the month of January. There were a total of 317 Sheriff's Sales in Lakeville in 2010. This compares to the 257 Sheriff's Sales in 2009. N a. 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CDA Dakota County Community Development Agency 006*0*00000*0006000006 To: Dakota County Cities From: Dan Rogness, Director of Community Revitalization Date: February 17, 2011 Re: Foreclosure Update Foreclosures in Minnesota H (J M E OWNERS According to the recently released Foreclosures in Minnesota, A Report Based on Sheriff Sale Data, 25,673 Minnesota homes were foreclosed on in 2010, an increase of I I percent from 2009 numbers. Last year is now the second highest year on record for number of Sheriff Sales that took place statewide. 2008 remains the highest year on record for total number of Minnesota Sheriff Sales. The Minnesota Homeownership Center, Greater Minnesota Housing Fund, Minnesota Housing and Family Housing Fund published the report, with research provided by HousingLink. The report can be viewed in its entirety by visiting http: / /www.hocmn.org /en /reports - fp.cfm Foreclosure Counseling Event The CDA is offering an evening of free Walk -in Foreclosure Counseling for Homeowners to ask questions and get advice from trained homeownership specialists. The event will be held on Thursday, February 22 from 3:30 — 6:30 p.m. at the Apple Valley Municipal Center located at 7100 147 St. W. in Apple Valley. This is the first foreclosure counseling event the CDA has hosted since April of 2010. Similar to previous events, no pre- registration is required. Homeownership Specialists will be available to speak to homeowners one -on -one to answer questions and give advice. The event will provide information on what happens during the foreclosure process, homeowners' rights, and solutions for long -term housing needs. If people are unable to attend the event, the CDA encourages them to call the foreclosure intake line at 651- 675 -4555. If you'd like more information about the event, please call Shannon Kehoe at 651- 675 -4472. Please note: January 2011 Sheriff Sale numbers were based on property owner postal address. Next month's a -news may show slightly adjusted numbers after municipality address is verified. Dakota County U W N E �' H t I' Community Development Agency Cz mw P& Dakota County Stats — January 2011 • # of Sheriff Sales in January — 151 (compared to 195 in January 20 10) • # of Notices of Pendency Filed in January — 234 A Notice of Pendency is filed by a mortgage company's attorney as official notification that the foreclosure process has begun. Not all of these result in Sheriff Sales. Mapping Using Dakota County GIS http: / /gis.co.dakota .mn.us /website /dakotanetgis/ The Dakota County Office of GIS is updating the 2010 Foreclosures and Notice of Pendency layers on a monthly basis. If you need assistance using this Web page, please call Randy Knippel or Mary Hagerman with the Office of GIS at (952) 891 -7081. In The News Provided in this PDF file are a few notable foreclosure articles that were published in the last month. Among the points of interest: • A prediction that 2011 will be a peak year nationally for foreclosures. One million more foreclosures are expected in 2011. • Minnesota homeowners are among the hundreds of thousands who have not only not found relief from the federal Making Home Affordable program, but have fallen deeper into debt or ruined their credit rating. • Most large US metro areas saw a spike in foreclosure activity in 2010. • More than 71,000 Minnesotans received pre - foreclosure notices last year, an increase of 8 percent from 2009. If you have any concerns, please call me at (651) 675 -4464 or send me an email at drognessQ)dakotacda .state.mn.us 0 N Ri 3 C • V • c • f'n • Q • f• c . v • -. Q • • • Q) • 0 ° • 402 V c • A 0 4 c • V Y C • � o . N (Z 0 td � s 0 tv P am: LJ LL N 3 0 Z N a E 3 d c N .c C 0 E Z N N L O a a N N O � N s L C C E 3 N � 7 U- h 0 L L l cl 0 C a c L • N � 3 O a, a E_ /t a L �u E � E U 'i � v v c o u 1 N d °c a a, bq O Z N N N N U N C O 4J U O1 C C O u a �n s � N � C Ln O N E m u O L O CA bA Q O ocl u� N s O N � 7 3 C O � (d N_ E > L. C O E 0 LL- 0 N L 3 • V • Q • .Fd • C • C • • Q- • H T > • > Q • � LL U V R C E • _ Y C • o U • c CL Z1 0 0 Z c a� L � N h d fD t L -0 O A L A A O _d Z U C 7 b E a) c s O N A A N � u U O Cd d L � d L � 7 E N O u c L � o U a� s � � L s u c � o 41 u a c. � O O a. C � C U 7 EE 0 U 0 v A c � L O L tv N > N C � A C a E O u u c a) a, A 'D C b4 a) O "- E O w A U Z a) tr- O v� A N N V A � C y d a) N O � O N E N Z O O Z �, �^ N O a1 7 Z u V a) IA C O U a c — O U� a^ N � 3 ` .o O a) — E V Z O fn w Q O 0 � V u w � o 0 A o � C 3 A 3 0 3 0 a.� A N E > O c a) L O E L- 0 LL Format Dynamics:: C1eanPrint :: http:// www. twincities .com/ci_17085451 ?IADID= Searc... Page 1 of 1 TwinCitiesecom 1 million more foreclosures expected Associated Press Updated: 01/13/2011 11:06:45 PM CST The bleakest year in the foreclosure crisis has only just begun. Banks temporarily halted actions against borrowers severely behind on their payments after allegations of improper evictions surfaced in September. However, most banks have resumed foreclosures, and the first quarter likely will bear that out, Sharga said. More than half of the country's foreclosure activity came out of five states in 2010: California, Florida, Arizona, Illinois and Michigan. Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown Together, these states recorded almost 1.5 million began in 2006. About 5 million borrowers are at households receiving a filing despite year -over- least two months behind on their mortgages, and year decreases in California, Florida and Arizona. industry experts say more people will miss payments because of job losses and also loans that exceed the value of the homes they are living in. "2011 is going to be the peak," said Rick Sharga, a senior vice president at foreclosure tracker RealtyTrac Inc. The firm predicts 1.2 million homes will be repossessed this year. The blistering pace of foreclosures this year will top 2010, when a record 1 million homes were lost, RealtyTrac said Thursday. One in every 45 U.S. households received a foreclosure filing last year, a record 2.9 million of them. That's up 1.67 percent from 2009. Foreclosures are expected to remain elevated throughout the year, pushing home prices down another 5 percent nationally before bottoming out. The number of homes that received at least one foreclosure - related filing in December was the lowest monthly total in 30 months. Total notices fell 1.8 percent from November and 26.3 percent from December 2009, RealtyTrac said. Print Powered By —� Dynarnics http://www.twincities.com/fdcp?1295020361419 1/14/2011 Format Dynamics:: C1eanPrint :: http: / /www.startribune.com /investigators /114426144.ht... Page 1 of 4 �Obi mo M' ! =- I Mortgage help can turn into disaster Many people who sought help under a federal program created to keep them from losing their homes are instead getting saddled with huge, unexpected bills. Thousands now face a stark choice: Go deeper into debt, or foreclosure. Lenders routinely approved short -terin "trial" loan modifications that reduced payments for desperate borrowers under the umbrella of the Obama administration's Home Affordable Modification Program. But lenders continued to count the mortgages as delinquent or in default. Now instead of granting permanent modifications, lenders often are reinstating the original loan terms and demanding big back payments. Through November nationwide, lenders canceled 729,109 trial modifications. No one knows how many Minnesotans have been affected, but housing counselors say it could reach into the thousands. Carl Christensen, a Minneapolis real estate attorney, said he is getting 15 telephone calls a week from "The banks put out their hand and say, 'We're going to help you,' and then stab people right in the back," Christensen said. Patti, 51, and Scott Weddle, 57, of Harris, Minn., were ecstatic when J.P. Morgan Chase offered in November 2009 to cut their monthly mortgage payments by about 20 percent under a trial modification. Patti was out of work with a neck and back injury, and the Weddles were having difficulty making ends meet. Nearly a year later, the Weddles were told that their application for a permanent modification was denied and that they would have to pay $24,228 to bring their mortgage current and avoid foreclosure. The Weddles insist the demand came as a shock, because they had made all their payments on time under the trial modification. "We did everything that was asked of us, and it only pushed us deeper in the hole," Patti Weddle said. J.P. Morgan Chase and other lenders argue that the risks are clearly disclosed to borrowers when they sign up for temporary loan modifications. Even so, many homeowners are caught by surprise. Print Powered By http://www.startribune.com/templates/fdcp?1296080982036 Dynamics 1/26/2011 Format Dynamics:: CleanPrint :: http: / /www.startribune.com /investigators /114426144.ht... Page 2 of 4 ;1bM,tffl = A growing number of critics contend the loan modification program, known within the industry as HAMP, may be doing more harm than good. Many homeowners are draining their savings and incurring new loans to make the temporary payments only to end up in foreclosure anyway when they can't afford the large, lump -sum payments demanded at the end of the process. The trial modifications also can ruin borrowers' credit. The reason: Many lenders classify modified mortgages as technically in default, even if borrowers make all their reduced payments on time under the trial plans. Each month these borrowers make reduced payments, they are reported as delinquent to credit bureaus. "We're seeing a lot of really sad stories of families who thought they were getting help only to discover they're $20,000 or $30,000 behind and about to lose their house," said Thomas Bloomquist, housing supervisor for LSS Financial Counselin, Services in Duluth. Incentives favor foreclosure It would seem to be in a mortgage company's interest to modify a mortgage, because lenders often recover only a small fraction of a loan after a foreclosure. But only 12 percent of all delinquent mortgage borrowers are receiving permanent relief under RAMP. Last month, a congressional panel predicted it would prevent just 700,000 to 800,000 foreclosures -- far fewer than the Obama administration's original goal of 3 million to 4 million. Some lending experts argue that the root of the problem lies in the complicated way in which mortgages are bought and sold. Most end up with institutions or investment trusts that hire servicers to collect monthly payments. Servicers, unlike lenders, don't generally lose money on a foreclosure. In fact, servicers actually can collect more in fees on a foreclosure than from modifying a mortgage, according to a 2009 study by the National Consumer Law Center. To correct this distortion, the U.S. Treasury offered incentive payments of $1,000 to s ervicers for each permanent loan modification, plus success payments of $1,000 for each year a borrower stays current. Critics argue that the payments are too small to offset the costs of modifying a mortgage and the substantial profits servicers earn from foreclosure - related fees. When the Weddles got turned down for permanent relief under RAMP, they decided t http://www.startribune.com/templates/fdcp?1296080982036 1/26/2011 Format Dynamics :: C1eanPrint :: http: / /www.startribune.com /investigators /I 14426144.ht... Page 3 of 4 �j M�,M;Tm o stop making their monthly payments. They expect to receive foreclosure papers any day and most of their belongings are packed. "If we had $24,000 lying around, then we wouldn't have sought help to begin with," Patti Weddle said. A spokesman for J.P. Morgan Chase said the risks were disclosed to the Weddles. Under t he trial modification signed by the couple, J. P. Morgan reserved the right to tenninate the plan at any point and begin foreclosure. The bank also reserved the right to determine the final amounts of unpaid interest and any other delinquent amounts. "We work with customers to try to keep them in the home whenever possible," said Thomas Kelly, a bank spokesman. "And the RAMP documents clearly explain the steps along the way." A rush to modify In many respects, the problems with HAMP mirror the slipshod practices that contributed to the housing crash, some experts argue. Often, lenders made trial modifications over the telephone. It was not until April 2010, a year after HAMP began, that the U.S. Treasury began requiring them to collect paperwork before approving a trial modification. Paula Viehman, 60, recalls the day she was approved for a trial modification in June 2009. After a 30- minute conversation, a CitiMortgage representative agreed to cut her monthly payment by half to $929. "It was the answer to my prayers," said Viehman, a state employee who lives in Minneapolis. Fifteen months later, CitiMortgage sent two letters claiming she was in default on her mortgage and owed $13,569 in back payments, late fees and other charges. When Viehman called to complain, she learned that CitiMortgage had denied her application for permanent relief under RAMP, though the bank had never notified her. Viehman refuses to make the lump -sum payment, largely on principle, because that would mean accepting Citi - Mortgage's claim that she's in default. Though she continues to make monthly mortgage payments, she suspects the bank will eventually foreclose on the house where she's lived for 25 years. "The longer I go through this, the madder I get," she said. "I did everything they asked and more." Citigroup, CitiMortgage's parent company, http://www.staitiibune.com/templates/fdcp?1296080982036 1/26/2011 Format Dynamics:: C1eanPrint :: http: / /www.startribune.com /investigators /114426144.ht... Page 4 of 4 [ib M M;T �i- s declined to comment about Viehman's complaints because of privacy concerns. However, in a written statement, the bank said the original terms of a mortgage remain in place during a trial modification. Borrowers only receive relief from delinquent payments if they get pennanent modifications. Citigroup said it will work with borrowers to develop payment plans to keep their mortgages current if they are denied. 'It all seemed very legit' Many borrowers say they never would have signed up for HAMP had they known the risks. Lynda Devine, 49, of Faribault, said she had not even heard of HAMP until she called her mortgage servicer, Aurora Loan Services of Colorado, about a routine matter. While on hold, she found herself listening to a recorded message that said she might qualify for RAMP. She checked it out and learned it was a program sponsored by the Obama administration. "It all seemed very legit," she said. Aurora agreed to cut her monthly payment to $1,400 from $2,000 under a trial modification. But Devine, a children's mental health social worker and waitress, soon found herself mired in a bureaucratic nightmare. As she sought pennanent relief, Aurora kept asking for the same documents -- including bank and tax statements. Devine estimates she has faxed documents to Aurora more than 60 times. Nonetheless, she received notice in July that she was in default. Soon after, she got a letter from Aurora's law firm saying she would have to come up with $13,496 or face foreclosure. Devine couldn't stomach the idea of losing her 1920s -era farmhouse and her 35 acres, where she keeps three beloved horses. Aurora did not return repeated calls seeking comment. Devine borrowed against her truck and horse trailer to pay the $13,496, but she's considering suing Aurora to get the money back. "The only reason I paid that money is because they threatened to take this place," she said. "If you ask me, that's theft." Chris Serres • 612- 673 -4308 Shortcuts To Links In Article http://www.startribune.com/templates/fdcp?1296080982036 Dynamics 1/26/2011 StarTribune.com Report: Most large US metro areas saw spike in foreclosure activity in 2010 By ALEX VEIGA , Associated Press Last update: January 27, 2011 - 6.16 AM LOS ANGELES - The foreclosure crisis is getting worse as high unemployment and lackluster job prospects force homeowners in an increasing number of U.S. metropolitan areas into dire financial straits. In Seattle, Houston and Chicago, cities that were relatively insulated from foreclosures early on in the housing bust, a growing number of homeowners are falling behind on mortgage payments and finding themselves on the receiving end of foreclosure warnings. Others have already seen their homes repossessed by lenders. All told, foreclosure activity jumped in 149 of the country's 206 largest metropolitan areas last year, foreclosure listing firm RealtyTrac Inc. said Thursday. The firm tracks notices for defaults, scheduled home auctions and home repossessions — warnings that can lead up to a home eventually being lost to foreclosure. Job loss, rather than time -bomb mortgages resetting to higher payments, has become the main driver behind rising foreclosures. "We've actually had a sea change in what's causing foreclosures, from the overheated home prices and bad loans to a second wave of foreclosures actually caused by unemployment and economic displacement," says Rick Sharga, a senior vice president at RealtyTrac. The Houston -Sugar Land - Baytown metropolitan area in Texas saw its foreclosure rate jump 26 percent from 2009, the largest increase among the top 20 biggest metro areas, the firm said. Seattle - Tacoma - Bellevue, in Washington, ranked second with an increase of nearly 23 percent, while the Atlanta -Sandy Springs- Marietta metro area in Georgia was third with a 21 percent bump. In the Chicago - Naperville - Joliet metropolitan area, foreclosure activity rose 16 percent, while home repossessions climbed nearly 20 percent, RealtyTrac said. "As the economy and unemployment improve, you'll see those markets recover fairly quickly, whereas you're still going to have a bit of a hangover in places like California, Florida and Nevada," Sharga said. Those states, and Arizona, remain the country's foreclosure hotbeds, accounting for 19 of the top 20 metropolitan areas with the highest foreclosure rates in 2010. Still, foreclosure activity in many of the metro areas in these states actually declined last year. Las Vegas- Paradise, Nev., registered the highest Print Powered By ; , _ _DYn m!c_s � ff- i # foreclosure rate in the nation, with one in every nine households receiving a foreclosure- related notice in 2010 — nearly five times the national average. But the metropolitan area's foreclosure activity fell 7 percent from the prior year. equity — when a borrower owes more on their mortgage than the market value of their home. About 2.4 million U.S. homeowners have only 5 percent or less equity in their homes, according to data from CoreLogic. Three California metro areas posted among the biggest annual drops in foreclosure activity: Riverside -San Bernardino- Ontario, down 20 percent; San Diego - Carlsbad -San Marcos, down 17 percent; and, Los Angeles -Long Beach -Santa Ana, down 16 percent. A big reason for the decline is lenders took steps to delay foreclosure actions in these states as they sought to manage the flow of troubled properties coming onto their books. In the final months of last year, several lenders went further, temporarily halting foreclosure activity to deal with allegations of improper evictions. Most banks have since resumed taking action against borrowers behind in payments, however, and the pace of foreclosures is expected to pick up this year and ultimately outpace 2010 levels. "We believe we're going to see an abnormally high growth of foreclosure activity in the first quarter and we do expect that 2011 will be another record year for foreclosure activity and bank repossessions," Sharga said, adding he projects bank repossessions will rise by at least 20 percent. That's likely to drag down home values further, potentially pushing more homeowners into negative Lenders took back 1 million properties in 2010, and no metro area saw more homes repossessed by lenders than Phoenix- Mesa - Scottsdale in Arizona. Some 5 5,3 72 properties were taken back by lenders there last year, up 17 percent from the year before. The Chicago metro area was second, followed by the Detroit - Warren- Livonia metro area in Michigan. Its home repossessions rose 19 percent. Print Powered By -2- Format Dynamics:: CleanPrint :: http: / /www.startribune.com /business /I 14335044.html ?e... Page 1 of 3 �ftoim M_ P7=K1 There's no end in sight to Minn. foreclosure mess 71,665 Minnesota homeowners got pre - foreclosure notices last year, meaning an end to the crisis isn't in sight. By JENNIFER BJORHUSI and JIM BUCHTA 2 , Star Tribune Last update: January 20, 2011 - 10:14 PM More than 70,000 Minnesota homeowners were behind on their mortgages and received pre- foreclosure notices last year, a warning that the housing market still faces serious hurdles in 2011. About 71,665 struggling homeowners got the notices in 2010, up 8 percent from 2009, according to the Minnesota Home Ownership Center, which released the numbers Thursday. The number of notices rose 3 percent in the Twin Cities metro area, but 15 percent elsewhere in Minnesota. The numbers suggest that despite glimmers of hope in the job market, the state could see more people lose homes this year than they did last year, said Ed Nelson of the St. Paul - based Home Ownership Center. "There is still a large number of Minnesota families that are facing their own personal mortgage crisis and are struggling with payments," he said. Seemingly endless waves of foreclosures in recent years have taken a human toll, flooded the housing market and dragged prices down. Foreclosures, short sales and other lender - mediated sales made up about 36 percent of all Twin Cities home sales at the end of 2009. In December, they accounted for nearly 48 percent of all homes sold. Thursday's report is further evidence that housing will trail the economic recovery, not lead it. On the bright side, Nelson said, when the totals of pre - foreclosure notices are lined up quarter by quarter, they appear to be leveling somewhat from when the practice of sending them first began in 2009. The total number of 2010 foreclosures in Minnesota won't be out until next month. But in the first three quarters of last year, there were 20,347 foreclosures statewide, according to HousingLink, a Minneapolis nonprofit housing group that tracks them. The 2010 total could rival that of 2009, when 23,092 homes were lost statewide. Nelson said he doesn't think the state will •s -• http:// www .startribune.com/templates /fdcp? 1295632599479 1/21/2011 Format Dynamics:: C1eanPrint :: http: / /www.startribune.com /business /I 14335044.htm1 ?e... Page 2 of 3 reach its 2008 foreclosure record, when 26,251 people lost their homes. "Hopefully, we will never see that number again," lie said. While the rise in notices may come as a shock to members of the general public who figure the years -long mortgage crisis must be waning, it's not so surprising to those who track housings twists and turns. Julie Gugin, head of the Home Ownership Center, blames the tough economy for the mortgage anguish. Pat Paulson, past president of the Minneapolis Area Association of Realtors, said the high level of pre- foreclosure notices didn't surprise him. "We have to admit that foreclosures continuing at these high levels is a concern, but it's not unexpected," Paulson said. Paulson noted that the numbers might have risen in 2010 because people got better at tracking the notices themselves. He also said that because homeowners behind on their mortgages often try to sell their homes to fix the problem, "a significant percentage" of people who got the notices may already have placed their homes on the market. The local foreclosure numbers focus on actual sheriffs foreclosure auction sales, and differ from the broader counts released by California -based RealtyTrac Inc., which include auctions but also include foreclosure- related actions such as default notices before auctions. According to RealtyTrac, which has already released 2010 totals, Minnesota's foreclosure activity fell by 1.2 percent in 2010. Pre - foreclosure notices are a relatively new thing. In Minnesota, since the fall of 2008 lenders or anyone planning to foreclose on a home are required to send the homeowner i nformation about the availability of housing counseling and to also send the homeowner's contact information to the counseling agency. The timing of these notices varies by lender, but the vast majority go out around the time of the third to sixth missed mortgage payment, Nelson said. Not everyone who gets a notice, of course, loses their home. Nelson said his group is studying the percentage that do. Jennifer Bjorlius • 612 -673 -4683 Print Powered By -:'.Duna ics http://www.startribune.com/templates/fdcp?1295632599479 1/21/2011 Format Dynamics :: CleanPrint :: http: / /www.startribune.com /business /I 14767919.html ?e... Page 1 of 2 The rental market turns around After years of struggle, a record number of apartments were rented in the Twin Cities in 2010. By JIM BUCHTA Star Tribune Last update: January 27, 2411 - 9:18 PM Renters are back in force and in a big way. Last year a record 6,400 additional apartments were rented in the Twin Cities metro area, causing the number of empty apartments throughout the region to fall from 7.3 percent of total inventory in 2009 to 3.8 percent by the end of last year, according to a quarterly report from GVA Marquette Advisors. The gains, which weren't accompanied by rent increases -- many expect those will come next year -- were significant, because during much of the housing boom rental apartments suffered as homeownership rose. In 2009, for example, vacancy rates spiked to a five -year high in large part because of so many renters -- and prospective renters -- gave up their apartments and doubled up with friends and relatives. Now though, growing jitters about buying a house, which has caused the homeownership rate to fall steadily, and signs of economic improvement are leaving prospective renters more emboldened to make a move. Vacancy rates during 2010 for various prices ranged from 2.8 to 4.9 percent, but there was no correlation between the price of the unit and the vacancy rate. Even upper- bracket apartments with monthly rents of more than $1,500 had only a 4.9 percent vacancy rate -- the same as for apartments priced at $501 to $600. And it's showing in every corner of the Twin Cities metro area. Downtown Minneapolis and St. Paul are among those neighborhoods where the vacancy rates are lowest, but even in some of the outlying suburbs vacancy rates have fallen significantly. In the southwest region of the metro, for example, vacancy rates declined by half. And in other areas the rate fell by at least a couple of percentage points. The average rent during the fourth quarter was $908, up just $2 from the year before. While prices have remained stable, concessions -- or incentives to rent -- have Advertisement Print Powered http://www.startribune.com/templates/fdcp?1296224874511 01/28/2011 Format Dynamics :: C1eanPrint :: http: / /www.startribune.com /business /I 14767919.html ?e... Page 2 of 2 largely gone away because many landlords are now in the driver's seat. And because for much of the past decade landlords have had to compete with a robust housing market, an economic recession and a federal home buyer's tax credit, there's been very little new construction, putting downward pressure on supply in recent months. During 2010 only 582 new units were added to the market, including the Ellipse, a 132 - unit apartment building in a bustling south Minneapolis neighborhood. Brenda Hvambsal, marketing director for Steven Scott Management, said that since opening in September the project is now 93 percent full, in large part because of demand from people who might have bought a house in the neighborhood, but are in a wait - and -see mode while they evaluate their options. "They're taking their time to decide what their next move will be," she said. "They feel like renting is a good safe decision right now." Multifamily has been a bright spot on the Twin Cities construction; it's represented about half of all new planned housing units. In 2011 GVA's Brent Wittenberg expects 870 new market -rate apartments to be completed in the Twin Cities metro area, not including hundreds of new senior housing and low - income apartments. At the current absorption rates -- or the change in the total number of occupied units -- he said, the market could support more new units. "We're projecting that demand will outstrip supply increases and that will hold vacancy rates down," Wittenberg said. That's one reason why GVA predicts a 3 percent to 4 percent price increase. Tina Gassman of the Minnesota Multi - Housing Association said that despite increasing demand, many rental property owner aren't popping any corks. She said that several years of low occupancy coupled with rising costs mean that many owners are still in financial catch -up mode. "They're trying to make up for past losses," she said. "So they're not dancing yet." Jim Buchta • 612- 673 -7376 Shortcuts To Links In Article 1. http: / /ezuri.co /214cl Advertisement http://www.startribune.com/templates/fdcp?1296224874511 Dynamic 01/28/2011