1.A Housing Improvement Areas Concept Discussion

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financing is usually not an option for associations because they lack the collateral that is needed to be approved for a loan. HIAs have become increasingly popular as cities work to ensure that townhome and condo associations do not fall into disrepair and potentially fall in value. At least eight other communities have created HIAs in the metro area, and Roseville created one earlier this year. Although the HIA statute has a sunset date of June 30, 2009, the sunset date is anticipated to be removed during this legislative session. Bills have been proposed at both the house and senate. Arden Hills North Homes Association The Arden Hills North Homes Association is a 140 unit association that was built in 1976 (Attachment B). The April 3, 2009, letter from the Arden Hills North Homes Association (AHNHA) describes why they would like to create a housing improvement area (Attachment C). In sum, the board of directors would like to replace the existing Masonite siding with a new and more energy efficient siding instead of continuing the current painting maintenance cycle. The estimated cost of the project is $2.3 million for the 140 homes, and the project would likely be completed over a two year time span. The association does not have sufficient reserves for this size of a project, and dues would have to more than double to prepare for a project of this size, which could be a significant hardship for some residents of the association. An HIA could allow this project to move forward with the costs spread over a longer period of time to reduce the monthly cost to association members. Financing A housing improvement area can be funded either by advancing the funds from the City or by issuing bonds. The city is paid back through a special assessment on the property taxes of each unit over a three to 20 year period, and administrative costs are reimbursed. If bonds are used, it does not count against the city’s net debt. Since there is a dedicated source of revenue via the special assessment on the property taxes, there is little to no financial risk to the city. The City’s financial consultant, Ehlers and Associates, has prepared a preliminary cost estimate for both financing scenarios. A 15 and a 20 year payback period was then applied to each financing scenario. These calculations will require additional refining if the project moves forward. The Finance Director and Ehler’s will evaluate the options and provide a recommendation on the best financing route if this project moves forward. If a resident can cover their full assessment up front, they can opt out of the HIA. If a property is sold, the special assessment continues with the next property owner. City of Arden Hills City Council Work Session for October 22, 2007 \\Metro-inet.us\ardenhills\Planning\Community Development\Housing Improvement District\042009 - CC Work Session - HID - AHNHA.doc Page 2 of 3