Committee Minutes

MINUTES/FINANCE-DEVELOPMENT COMMITTEE
Wednesday, June 25, 2003 - 4:15 p.m._________________

Members present: Christensen, chair; Glassheim, Hamerlik.
Staff: Keith Lund, Terry Hanson, Cindy Voigt, Meredith Richardson, Peggy Kurtz.

2.1 Unobligated 2003 CDBG funds.
Mr. Lund reported on November 4, 2002 the CDBG Program Year for 2003 was set, they anticipated income in the amount of $1.75 million and approved a budget of $1,847,432 - $97,432 in excess of anticipated budget to be funded out of additional program income if received - part of that award included special economic development project that did not come to fruition. On June 2, 2003 an amendment was passed by the city council that cancelled that project and brought the program down to its original budget of $1.75 million; increased United Way public service funding by $50,000 to $230,000 and placed an unobligated amount of $252,568 in Unprogrammed Funds for future allocation. In order to comply with HUD's timeliness requirements, it is important to obligate funds as soon as possible. He summarized 4 projects in his memorandum that they could consider for funding of those dollars; and has a 5th project to add.

1) combination of the two highest-ranking projects: Community Action's Home Rehab Program and City's Affordable Housing Program.
2) Shelter for Homeless was awarded $200,000 in 2003 funds and $200,000 in 2004 funds, and the City could choose to unencumber those 2004 dollars and apply the $200,000 to this year's program
3) Storefront Rehab. Program - that with the dollars carried over and the amount of applications they received were $50,000 short.
4) There has been much discussion on the council floor with Affordable Housing Districts and assisting the Housing Authority in the Promenade Subdivision with the installation of infrastructure for that project.
5) That since he prepared the memo that the LMI watermain replacement project administered by the engineering department and portion that was eligible in the LMI area when it was bid was $40,000 short, their entire watermain replacement was under budget but this shortage would be taken out of the Water Utility Fund and would like to recommend to apply $40,000 to this project and save the Water Utility Fund those dollars for future projects.

He stated he had talked with engineering today and they could do one more street of watermain replacement that is eligible, North 10th Street from 1st Avenue North to 2nd Avenue North, for an additional $30,000 and would be a savings, have contractor there and if didn't receive it this year, would apply for next year.

He presented his recommendation:
$ 40,000 for the LMI watermain replacement for shortage in the bid
$112,568 to the Affordable Housing Program
$ 50,000 for Community Action's Housing Rehab. Progam
$ 50,000 for the Storefront Program - to leave the Shelter's project alone for 2003 funding and let them work on their project with 2004 funding.

He stated he would like to discuss the Promenade infrastructure, that it is a worthwhile project - the City has at its disposal the Section 108 Loan Guarantee Program where we could borrow money from HUD and pay it off with future CDBG Program dollars in the next 5 to 7 years (how the council would deem appropriate) and assist that project in that process without affecting this year's funding. Their project is essentially on tap for close to $450,000 worth of underground utility work this year, entire project infrastructure is anticipated to be just short of $1.1 million; and if want to allocate an additional $30,000 to the LMI watermain replacement project, they could reduce the Affordable Housing Program down to $82,000 - with recommendation as follows: $70,000 for LMI watermain replacement and $82,000 for Affordable Housing.

Hamerlik stated that when they reviewed storefronts before, there were some that were considered to be ineligible projects, some of low priority, some for signs and were going to change some of those prerequisites and have a meeting before the next go around to determine any changes by council, and asked whether $50,000 for Storefront is a hard number. Mr. Lund stated one applicant doesn't appear to have his taxes paid, one application is outside of the boundaries - this number is a little fat but does provide a contingency for carryover for next year or for projects that may run over. He stated there are 11 applications - and if wanted to could decrease that by $20,000 or $25,000. Question raised if reduce it by $20,000, where put it. Mr. Lund suggested if take $20,000 and make Storefront $30,000 and go $102,658 for Affordable Housing; Affordable Housing is a priority, home ownership is obtainable for people that it might not otherwise have been and would like to take advantage of the time and continue that. Housing Rehab. Program by Community Action is good program and have a lot of projects going. Hamerlik agreed that anytime we can reduce any specials, etc. out of General Fund is good.

Keith Lund stated he would like recommendation to come out of this committee to pursue a Section 108 Loan Guarantee Program where the City would borrow the funds from the Department of Housing & Urban development, they would provide the funding and we would pay it back through a source - choose any source but obvious is future CDBG funds, $200,000/year for the next 5 years, low interest rate and less than 2% today. He stated he would like to amend their annual action plan to include it and the terms of the loan and entire project would come back to the council for approval, and would begin their environmental review process immediately.

Glassheim moved that we recommend the council allocate the $252,568.00, with breakdown as follows to go to committee of the whole and then to city council:
$40,000 for LMI for watermain replacement for shortfall in the bid
$30,000 for North 10th Street
$102,568 for Affordable Housing
$ 50,000 for Housing Rehab Program under Community Action
$30,000 for Storefront Rehabilitation
Hamerlik seconded the motion.

There were no comments from the audience relative to the motion.

Upon call for the question, the motion carried.

Terry Hanson, Housing Authority, stated what he would like to hear recommendation from this committee to go to committee of the whole to authorize city staff to start pursuing the allocation of future CDBG funds towards the infrastructure in the Affordable Housing District, known as Promenade First Addition, and to investigate utilization of the Section 108 Loan for the City.

Glassheim moved the following motion to make a recommendation for the council that as part of the Affordable Housing Project known as Promenade First Addition that we authorize Urban Development Office to work with the Housing Authority to investigate the application of a loan with HUD Section 108 Loan and to use those funds to fund the infrastructure required in Promenade, and that we would obligate future CDBG funds to repay the loan over a period of 5 to 7 years. Hamerlik seconded the motion.

It was noted that the term would be determined at the execution of the agreement; and subject to an application from the Housing Authority; and this year they are estimating $1.4 million program and should stay at near that level for the next 5 or so years; the Section 108 Guarantee wouldn't specify that you had to use CDBG funds. Glassheim stated repayment takes $200,000 out of $1.4. Mr. Lund stated it is his intention and desire to establish programming that actually provides an income back to the City, to roll projects over and would like to establish some programs again to continue their larger than average program years, otherwise if do nothing to roll money back into the CDBG Program within the next 10 years will be talking about a half million a year and back to where started.


There was some discussion as to whether the motion should include a dollar amount not to exceed $200-250,000 and term. but that is still to be negotiated with the loaning authority.
Mr. Hanson stated the terms may be longer than 5 to 7 years but the amount can't be any greater than 5 years entitlement funds, $500,000, and can't be more than $2.5 million but won't be that. Mr. Lund stated they could amortize up to 20 years but that is too long. Hamerlik stated intent would be approximately $200,000 for 5 years or proximity of that; and Christensen agreed that would be part of the motion. Mr. Lund stated the original engineer's estimate says $1.076 million and if go 5 years, that is essentially $200,000/year plus interest, $210,000 or $215,000. Christensen stated they will be contemplating spending approx. $200,000 of future CDBG funds or from CDBG Program income and now have source from either.

Glassheim questioned number of houses - Mr. Hanson said 80 - 84 houses, and that he is trying to find a developer that might take it on and the intent is to have some zero lot line homes but wants to find developer that has ideas of what want to put there, whether 20 ft. home or 25 ft. home and that is why left unplatted. Mr. Hanson also stated intent is for single- family owner-occupied in the affordable housing district and this will be able to provide the Housing Authority to put the infrastructure in and sell the property with a reduced price of $15,000, and hoping will be able to be put on the market for less than $100,000; that there are other entities (Greenberg and Crary) that also have affordable housing districts but didn't think would be willing to make the commitment that the Housing Authority is willing to make - to guarantee at least 51% of the homes will be sold to LMI families (modest entry level homes). Mr. Lund stated that is the key for making this project eligible for CDBG funds.

Hamerlik called for the question on the motion; died for lack of a second.

Glassheim asked if other developers weren’t required to put a certain number of houses below $135,000. Christensen stated we are waiting for recommendation from staff as to how they are going to monitor so that developers meet the requirements and get 75% of homes, because now authorizing the specials and want something from the developer stating that if they don't make it, can't let that drop. Mr. Lund stated he had sent a memo to the city attorney asking about the remedies that the City would have if a developer didn't meet his/her target. Christensen stated there has to be something before we let any contracts. Mr. Lund stated he didn't think that was part of the motion but thinks that 15% special assessment markup vs. 27%, reduced right of way, etc. have already been provided to the developers in the affordable housing district. Glassheim stated he thought there was some obligation that went with that. It was noted that Gershman had asked that the committee reconvene to determine what could have as a remedy - concern is what remedies the City has if one of the developers does not meet the requirements of 75% of the homes being sold at $135,000 or less - the developers made that commitment but the establishment of a policy has not been proposed - that was understood when they voted for the motion.
There was suggestion that this falls in finance/development and affordable housing and that the committee could reconvene and invite Kreun - Christensen asked that a meeting be scheduled for the week of July 7 at 5:00 p.m.

Upon call for the question on the motion, all members voted in favor.

ADJOURN

It was moved by Hamerlik and seconded by Christensen to adjourn. Motion carried.

Alice Fontaine
City Clerk

Dated: 6/26/03