HomeMy WebLinkAboutItem 06.lDate: September 6, 2011
Supporting Information
HOUSING IMPROVEMENT AREA POLICY
Item No.
Proposed Action
Staff recommends adoption of the following motion: Move to adopt the attached Housing
Improvement Area Policy.
Passage of this motion will result in the City having a policy for the creation of housing
improvement areas to assist homeowners associations in financing improvements.
Overview
The City was contacted several months ago by the property management company for one of
the townhome homeowners associations in Lakeville to inquire about any programs that could
assist them in financing exterior improvements to their townhome units. Minnesota Statutes
428A authorizes cities to create housing improvement areas to assist in the financing of
improvements to the privately -owned residential units.
While the City of Lakeville has not previously created a housing improvement area, a number of
other cities in the Metro Area have including Eagan, St. Louis Park and Hopkins. The City (or
the Dakota County CDA) basically act as a lender to home owners that live in developments
that have associations that are responsible for maintenance of some or all of the exterior
portions of buildings and /or units. The cost of the improvements becomes a fee that is
assessed against each unit and collected on an annual basis. The fee could be collected with
annual property tax payments or collected with the monthly association fees.
Staff has prepared a draft Housing Improvement Area Policy for the Council's consideration.
The primary goal is to stabilize neighborhoods by the removal of blight as a result of upgrading
existing housing stock in Lakeville neighborhoods. It should be noted that all of the costs
associated with creating and implementing a Housing Improvement Area would be repaid by
the property owners. The City Council reviewed this proposed policy at their August 22 Work
Session.
Primary Issues to Consider
• What is the impact of the proposed Housing Improvement Areas? It will provide an
additional method for homeowners associations to finance needed improvements.
• Copy of proposed Housing Improvement Area Policy
avid L. Olson
Community and Economic Development Director
Financial Impact: $ None Budgeted: Y/N Source:
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