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HomeMy WebLinkAbout1.A Housing Improvement Areas Concept Discussion MEMORANDUM DATE:Agenda Item 1.A April 20, 2009 TO: Mayor and City Council FROM: James Lehnhoff, Community Development Director SUBJECT:Housing Improvement Areas Concept Discussion Arden Hills North Homes Association (AHNHA) Requested Action Provide input and direction on the idea of creating a Housing Improvement Area (HIA) for the Arden Hills North Homes Association (AHNHA). Background In 1996, the State gave cities the authority to create Housing Improvement Areas (HIA). An HIA is a tool by which a condominium or townhome association can obtain financing assistance from a city, economic development authority (EDA), or housing and redevelopment authority (HRA) to complete improvements to common areas and elements. Improvements include such things as roofing, siding, landscaping, roadways, and walkways.A complete description of the purpose, requirements, and process of creating an HIA is included in Attachment A. The HIA option was created to provide a tool for associations that do not have sufficient reserves for a larger project or are unable to raise sufficient capital in the needed period of time for the project. While associations can raise monthly dues to pay for projects, the higher dues may be unfeasible or unsustainable for the residents. Additionally, an association may be unable to raise sufficient funds quickly enough for time-sensitive projects. Obtaining traditional private City of Arden Hills City Council Work Session for April 20, 2009 \\Metro-inet.us\ardenhills\Planning\Community Development\Housing Improvement District\042009 - CC Work Session - HID - AHNHA.doc Page 1 of 3 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 Next Steps While the AHNHA board of directors has been discussing this idea for several months, they have not yet fully engaged the association. Because this project will take quite a bit of effort from the board and the association, the board wanted to gauge the interest of the City Council before moving forward. If the City Council is interested in this concept, the board will begin to work with the full association to develop a more detailed course of action. The board is looking for direction from the City Council and, ideally, a Council consensus that this is a project that should have further exploration and discussion. If this moves forward, staff will also prepare a cost reimbursement schedule for establishing the HIA. Staff has informed the board that we would also want to see the communication plan with their membership, a more detailed work timeline, finalized project cost estimates, and a financial plan if this moves forward with their membership and the City Council. As noted in Attachment A, at least 25 percent of the properties within the proposed HIA must petition the City in order for the HIA to be established. It is not uncommon for a city to set a 50 percent petition requirement. The AHNHA is aware of the potential 50 percent petition requirement, and they have already indicated that they would want at least 50 percent of their membership to be supportive before moving forward. Attachments House Research: Housing Improvement Areas (August 2005) Map of the Arden Hills North Homes Association April 3, 2009, Letter from the Arden Hills North Homes Association Ehler’s Preliminary Cost Estimates for the HIA 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 3 of 3 HR OUSEESEARCH Short Subjects Karen Baker and Deborah A. DysonRevised: August 2005 Housing Improvement Areas What are housing A housing improvement area (HIA) is a defined area in a city in which housing improvement areas? improvements in condominium or townhome complexes may be financed with the assistance of the city, or the city’seconomic development authority (EDA) or housing and redevelopment authority (HRA). Prior to 1996, cities needed special legislation to establish an HIA. In 1996, cities were granted the authority under general law. The general law, codified in Minnesota Statutes, sections 428A.11 to 428A.21, sunsets June 30, 2009. What kind of The improvements that may be made under this law include improvements to the improvements can common elements in a condominium complex or townhome development. be made in an HIA? Examples include roofing, siding, landscaping, roadways, and walkways. How is an HIA At property owner’s request. An HIA can only be established at the request established?(petition) of at least 25 percent of the owners of the housing units in the proposed area. If the petition is filed, then the city prepares an ordinance that: describes the area specifically, states the basis for imposing fees and the number of years the fees will be imposed, and makes a finding that without the HIA, the proposed improvements could not be made. The ordinance must also specify if the city, the EDA, or HRA will implement the ordinance. Notice, public hearing, ordinance. Before adopting the ordinance, the city must hold a public hearing at which the proposed improvements, affected housing units, and the exempt units are listed. Fees can be imposed on the basis of the tax capacity (value) of the housing unit, total square footage of the housing unit, or a method determined by the city and specified in the resolution.Potentially affected property owners may testify at the hearing. Those property owners may object in writing, and if the city agrees, may be excluded from the area or fee imposed. The ordinance may be adopted within six months after the conclusion of the public hearing. How are theThe city may finance the housing improvements by: improvements (1) advancing funds available to the city to pay up front and then recover the financed? costs by charging fees; or (2) issuing bonds to pay the costs and then imposing fees or assessments to repay the bonds. Obligations are not included in the city’s net debt and no election is required for their issuance. Before imposing fees, the notice must be issued and a public hearing held. Within six months of the conclusion of the public hearing, the city may adopt a resolution to impose the fees. What plans or Before the city imposes and collects a fee provided for in the resolution, the reports are condominium or townhome association must develop a long-term plan to maintain required?the complex. The plan must address operations, maintenance, and necessary capital improvements of the common elements. It must identify financing for the projects. The association must also submit its audited financial report to the city annually. Although each city with an HIA is required to submit the HIA ordinance to the Commissioner of Revenue, this reporting has not been done. The fees imposed are reported as special assessments by the cities to the county auditor and collected through the property tax statements. Since these amounts are not identified separately, and with no effective statewide reporting, it is impossible to know how much money is collected for HIA purposes statewide. How many cities As indicated above, there is no way to know how many HIAs have been have established established, but as of 2004, at least six cities are known to have adopted HIA HIAs?ordinances. City# of Districts Year Authority EstablishedGranted Coon Rapids 42002 Hopkins41989 New Hope 31997 Plymouth 1N/A St. Louis Park 12002 Victoria12003 The scope and length of projects vary within each HIA. The ordinances establishing HIAs are for three to 20 years, with fees assessed annually. However, the HIA ordinance may allow prepayment of fees. The Research Department of the Minnesota House of Representatives is a nonpartisan office providing legislative, legal, and information services to the entire House. House Research Department 600 State Office Building St. Paul, MN 55155 651-296-6753 www.house.mn/hrd/hrd.htm Arden Hills North Homes Association 1341-1481 Arden View Drive Arden Hills, MN 55112 April 3, 2009 James Lehnhoff, Community Development Director City of Arden Hills 1245 West Highway 96 Arden Hills, MN 55112 Dear James: A Housing Improvement Area is a defined area in a city in which housing improvements in condominium or townhouse complexes may be financed with the assistance of the city, or the city’s economic development authority (EDA) or housing and redevelopment authority (HRA). The Board of Directors of Arden Hills North Homes Association (AHNHA) has voted to request that the City of Arden Hills consider establishing our community of 140 townhomes as a Housing Improvement Area (HIA) as defined in Chapter 428A of Minnesota Statutes 2007. AHNHA is a 140-unit development built in 1976, with Masonite siding. We have been on a 5-year painting cycle (paint over 4 years with the fifth year off, which is the current 2009 year.) We may be able to paint one more time, but would prefer to re-side, not using the cheapest thin vinyl as other developments have done, but rather to go with an insulated product that would enhance appearance, confer additional hail resistance, and add R-value for decreased energy consumption. A committee has been working on this for several months, and now has three competitive estimates based on one particular quad in detail that they deemed to be representative, and extrapolating from there. Our buildings are mostly quad, with a few duplexes. Using insulated vinyl that could add up to R 5, allowing for wood repair based on much previous experience right here, including housewrap (such asTyvex) and/or fanfold insulation, replacing gutters and downspouts where they exist now, and adding a 15% contingency allowance, the total comes to about $2.3 million. This is probably not doable at this time with even a five-year monthly special assessment on dues, but if payment could be stretched to 10 or even 15 years with a monthly equivalent closer to $100, this would sound a lot better to homeowners. We understand that with City assistance this could be done up front, with the cost (albeit increased because of the various legal steps and interest cost involved) charged back as fees and collected with taxes. We would appreciate this receiving attention now to see if it would be a viable project from the City’s point of view. We don’t expect a final answer now but are reluctant to embark on the required homeowner petition and legal preparations on something that has little or no chance of succeeding. The alternative is one more painting cycle that we can handle out of dues, but then replacement of siding would become essential, whereas it would be preferable now to maintain appearance and property values. Thanks in advance for your attention and that of the Council. Yours sincerely, /s/ George Redman President