Committee Minutes

MINUTES/JOINT MEETING OF FINANCE AND PUBLIC
SERVICE COMMITTEES
Monday, January 23, 1995 - 7:00 p.m.

Members present: Carpenter, Babinchak, Geller, McCabe, Hagness,
Beyer, Hamerlik, Klave.

1. Matter of reducing City charges for lots that would be
devoted for houses costing less than $100,000.
2. Matter of reducing 50% upfront cost for special assessments
for lower cost housing.
3. Matter of extending or increasing new home tax abatements for modestly priced spec. homes to encourage more developers to
look at this market.

Mr. Hagness introduced committee members and asked for comments from the audience.

Mr. Hagness stated that items came from urban development committee and copies of memo from John Schmisek, city auditor, re. affordable housing and associated costs, were distributed to the committee. Saroj Jerath, dep.city auditor, distributed copies of memo from Al Grasser, re. survey of special assessment costs in Grand Forks, Fargo, Bismarck and Minot. Mr. Hagness noted that Mr. Tingum had always said these percentages were costs to the City, and pay either through percentage of specials or pay through some other means. Mr. Vein stated that any reduction would have corresponding increase somewhere else to make up for that; and that he doubts with 8% for engineering whether breaking even (covers initial design review, inspection, etc.) and percentage only to do with construction cost, nothing to do with lot cost. He also noted that construction costs relatively same as in other cities (may vary for street widths, type of paving, etc.) and that they didn't collect information re. lot prices. Mr. Hagness noted that location, size, etc. determines cost and that some lot prices included installed utilities. Mr. Vein also advised that where developers installing utilities, they are required to meet City standards, and City reviews plans and does inspection.

Mrs. Beyer noted that lot cost has to do with supply and demand. Mr. Hamerlik stated that he had requested staff to obtain information from cities in Minnesota also; and it was noted that staff had called East Grand Forks. Mr. Hamerlik also asked if City reduces cost, what assurance that reduced cost to the buyer down the road?

Mr. Hagness suggested more townhomes, less green space, smaller homes on 25-33 ft. lots, with more townhomes uses less lots, use less prime agricultural land, suggested urban renewal along Washington Street, put in multi-family housing. Other suggestions were sidewalks on one side of street only, less restrictive Code, bond rather than upfront money and release of bond upon construction of housing. He also noted they don't need MINUTES/FINANCE & PUBLIC SERVICE COMM.
January 23, 1995 - Page 2

75-100 ft. lots and 3-stall garages, that costs higher in cul-de-sacs and also costs City more money; that 8% park dedication also affects cost of lots.

Mr. Hamerlik referred to perception that housing not available, negative image of Grand Forks.

Beyer suggested lowering costs through zoning - tract housing as starter home or for retired person, work through Planning and Zoning but questioned whether there is market for that here - taxes high, paying for what getting.

Mr. Bushfield stated that Code establishes minimum lot size - 50x140' - 7500 sq.ft. average size, market driven system, lots 10,000 sq.ft. and expressed concern about direction going. However, if change things and force the 50% down to something else, encourages speculation; and that's one of the reasons changed to 50%; force private enterprise into market analysis. He stated If demand there, they will provide additional 50%, shared by private institutions and developers, 3/4th majority vote of council to change that regulation.

Geller stated that 50% upfront doesn't reduce cost of the house, and Bushfield stated there is small savings, financing our share by municipal bonds, if 50% cost absorbed in cost of mortgage, cost very comparable. Carpenter agreed, not going to change cost but would allow more developers to get into the business.
Bushfield stated small developer unable to come up with 50% upfront, however, most developers have been able to do even with 50% requirement. He stated that if Mr. Schmaltz able to sell lots in Sun Land West Addn. in that price range, find out if market out there; not sure shortage of homes in that area. Mr.
Schmaltz stated lot size 6500 sq.ft. in Sun Land West.

Beyer stated it concerns her to say that we can lower upfront costs, people building houses and in turn go back to the bank and have glut like in the 80's. Hamerlik stated he was not recommending dropping upfront monies.

Hagness stated that requiring 20 acre plots to come into the city, but maybe only annex lots to be developed. Bushfield stated Sun Land zoned for PUD, mix of units, incl. single family lots; people want large lots; people want double stall garages. He stated that in developments with smaller lots, 3500 sq.ft., developer went broke, tried in Richard's West, people want large lots; will see free enterprise build moderate priced homes.

Geller asked if there was any incentive to work on more mod. priced homes, any incentive from developers standpoint?
Hagness stated that housing prices high - people asking $30,000 over what City assessed at, that's what market is bearing.
MINUTES/FINANCE & PUBLIC SERVICE COMM.
January 23, 1995 - Page 3

Bushfield stated city needs more homes as built in White Clover Subdiv., Burke's Home Addn. - 50'60 ft. lots, tract homes, that there is possibly market for them today, only no developers building - 1200 sq.ft. house, no garage etc.; don't have developers willing to try that as profit margins not very great; problem getting developers to do that, questioned whether problem out there. Carpenter asked what the average cost of houses in Sun Land West, incl. lot; and Mr. Schmaltz stated cheapest in the $80,000 price range, total cost $100,000, shooting for $90,000 - 864 sq.ft. each floor - affordable housing they are taking care of that, they will have 50 lots available at that price, if reduce cost of lot, then build $75-80,000 house, land 25% plus 75% infrastructure. Mr. Schmaltz stated that when committee asked what encouragement to give developers, he suggested reducing right of way, rolled curb, infrastructure under streets.
Klave stated that houses being built large because of demand, 95% move-up buyers, is there market for $60-75,000 homes, yes; need to re-educate - first time buyers - rental of $450-600 for apartments, they could be in house for same price if those houses available.

Dave Beach - don't know that they came to any firm conclusions in their committee; but sent to the committees to deal with these 3 issues; didn't come to conclusion as committee. He stated he would like to address fact that there's perception out there - hear how other cities do better, and perception in Air Force.
Beyer stated no one's going to build until know if Air Base going to be here; if not on the list will see construction take off; tax incentives not there any more; many things impact - not lot of people with expendable income.

Beach stated he wouldn't disagree; but not talking just about apts, Air Base interested in buying houses, etc. not just rental situation; when know final decision on Base that will have lot of bearing on rental situation.

Geller stated there is nothing wrong with creating policy toward some desirable goal, no problem with looking at through Housing Authority, and City taking more risk, reducing upfront cost for specific type of development, do this with jobs all the time.
Beach stated that he didn't think that we should let that experience (80's when City got lots back) make decision for us, there are times City should take risks, and not be too concerned about 50% upfront monies; no matter what upfront monies are, home owner ends up paying that; that development game in GF only for the large developer, can't control interest rates, labor costs, but can control 50% upfront monies; experiment with 20-25%.
Hagness suggested bond in lieu of upfront monies and when developer builds release bond, don't want to be part of speculation, what landowners doing to reduce cost of lots?
MINUTES/FINANCE & PUBLIC SERVICE COMM.
January 23, 1995 - Page 4

Beyer stated City can reduce lot size requirements, not in favor of asphalt streets or utilities under street, but rolled curbs, no curbs, can look at what is modestly priced houses; see what happens to Mr. Schmaltz' development. She stated that public service and P & Z come up with smaller lots? tract housing?

Mr. O'Leary stated that in the list of recommendation that came to you were topics for discussion; one thing skipping is value of land in older neighborhoods, because of cost of housing seeing lot of neighborhoods turn over to rental units, seeing decline in maintenance, thinks lots and neighborhood lot of value, thinks lots 50xl40, troubles him to see what's happened in areas adj. to CBD; and they have suggestions that will address part of the problem. He stated that the City approved demonstration program in these neighborhoods, to go in and demolish substandard house and build new house, thinks can do for $55,000 house, 3 bedroom, 1 bathroom house; HUD money to help acquire lots and with help of TIF, build new houses in older neighborhoods; turn neighborhoods around; houses that looked at 2 years ago for $122,000 now $25,000; but if want to take look at.

Some discussion re. housing shortage - whether perceived or real; that Housing Authority can build, but would rather see by private developer, cost of house impacted in econ. dev.; thinks factors impact what businesses come to G.F., other indicator is Bd. of Realtors report; that affects our ability to attract new business to city. Carpenter stated he would be receptive to reducing 50% upfront costs.

Hamerlik stated he was under impression military building some new units, that has impact; Mr. Beach stated he was not aware of plans for additional housing, they are refurbishing some dormitories. Tom Hanson, WFW, stated Air Force refurbishing 150 units at Base.

Mr. O'Leary state that if Housing Authority got involved through Housing Rev. Bond, margin lots, risks greater - they have program where help buyer come up with down payment for first time home owners - don't want to compete with private sector developers.

Tim Lamb, 912 N. 39th St., stated they have come up with some interesting ideas, Project 2000, trying to establish affordability, $75,000, then establish trade-off's, they think can develop in that price range - 1,000 sq.ft. house with basement on 50x140' lot, no garage, think can do on stick built houses; trying to establish groups of potential home buyers, when build then they can move in. He stated they do have concern - don't have as much interest as thought they would have - have little over 20 people signed up. Tom Hanson stated land available, problem extending utilities, that if utility extension picked up through tapping charges rather than to current lot,
MINUTES/FINANCE & PUBLIC SERVICE COMM.
January 23, 1995 - Page 5

help keep costs down; they proposed alley so when afford to build garage access from alley, if have affordable housing building garage when can afford.

Klave stated problem not unique to G.F. but to United States, are building larger houses.

Mr. O'Leary stated if they want to see Housing Authority more active, need to send clear message to them.

Moved by Beyer and Geller to recommend to the city council that we direct Housing Authority to become more actively involved in housing development.

Mr. Hamerlik suggested that they recommend to the Housing Authority that they become more involved rather than directing them to do that; that there are lot of implications that they need to discuss. Mr. Carpenter stated this might be premature - if get complaints from private sector.

Joan Johnson stated she would like to see alternatives explored with private sector, and provide some incentives to build houses between $75-80,000, then Housing Authority look to get involved; need to explore private sector first, can provide some housing stock but not only player in the market but need to be con- siderate of private sector.

Mr. Geller stated he would like to see Housing Authority start looking at plans and give city council alternatives.

After further discussion Beyer and Geller withdrew their motion.

Carpenter stated there were couple areas that want to look at and put something specific together; reduction of upfront money to a small development targeted to affordable housing; and perhaps refer that to finance or someone else to come up with specific plan to bring to the city council.

Hamerlik stated that if minutes of the committee reflect discussion here for future reference - feels comfortable for Mr. O'Leary and committee, if not, maybe have something in a motion form so it's in the minutes that we are endorsing idea that they continue to consider some work in the housing area.

Beach stated that one word, ie., speculate (speculator) not a dirty word, any time you take risk - speculating; and asked could we ask city attorney to figure out some structure to take danger out of upfront utility cost of 20-25%, could we find way to insure that City wouldn't get in position as back in the 80's, and still lower the cost - either by bond or covenant in the
title of the land, ie., 20% upfront and if no building in 2-3
MINUTES/FINANCE & PUBLIC SERVICE COMM.
January 23, 1995 - Page 6

years then a higher percentage becomes payable. Mr. Hagness asked how force them to pay 3 years later - suggested 20% upfront and 30% bond.

Mr. Bushfield stated in terms of the upfront costs - the benefits and the cost are going to be the same - same cost falls upon property owner, really how share that burden of cost. He stated that the one thing unique to City of Grand Forks is that land around Grand Forks controlled by 2 - 3 property owners; and need to ask do they need that benefit of reduced cost? He stated that if do need to target group to benefit from that reduced cost: if want to do redevelopment, create redevelopment zone, geographically define on a map and then target benefits to that area (tax abatement, reduction in special assessments, etc.), that's mechanism to accomplish that.

Mr. Geller stated that the 50% upfront requirement has not slowed growth, whether or not it's inhibiting growth of more modestly priced homes, doesn't know; but if looking at backing off on 50% upfront, don't we need to back off for everybody and say here's how we'll develop lots in the city from now on, but come up with a target and add a geography to it and put parameters together and provide benefits under those limited circumstances; and that's what he thinks of as directing public policy to some kind socially desirable goal that the City agrees is worth going after.

Klave stated he doesn't want to see that out there for the $200,000 homes, because not needed; but need for the $100,000 houses or less, but how going to do it is going to be complete issue because get into another big discussion that going to be "not in my backyard"; if have $200,000 development and then put in $100,000-80,000 next to it doesn't fit.

Mr. Vein stated that development changed since 70's and 80's, then developed whole subdivision, now developers coming in with 30-40 lots.

Joan Johnson stated she attended Housing Authority conference, that in one session talked about providing affordable housing for communities and one suggestion was through zoning, that for every new subdivision that came in, a certain %age of land was zoned MPU (moderately priced unit), so when build one or two higher priced houses, must construct one modestly priced unit (whether house, townhouse, etc.) so housing stock always being replaced.

Moved by Beyer and Carpenter to refer to finance committee to put affordable housing package together (define moderately priced home, etc.) Motion carried. (committee only)

Meeting adjourned.
Alice Fontaine
City Clerk

Dated: 1/25/95.