Committee Minutes

Minutes/Finance-Development Standby Committee
Tuesday, August 23, 2005 - 4:00 p.m.____________

Members present: Glassheim, Hamerlik, Gershman.

Also present were Greg Hoover, Keith Lund, and reps. from Red River Valley Community Action Agency, Al Franks and Kent Keys.

1. 2006 Home Rehab Program.
Keith Lund, Urban Development, stated that his office and city council have been looking at ways of revolving and recycling CDBG dollars for realizing a benefit in revolving some of the flood money - one of the suggestions was to develop a rehab program in which a loan program as opposed to grants which has been the case. Red River Valley Community Action Agency has been administering Home Rehab grants within the city for 4 years, and they have jointly prepared an application for CDBG funding and Citizens Advisory Committee will hear it on Thursday and go through the regular process. They wrote the application and RRVCA submitted it for $600,000 and summarized the set asides: $450,000 for Housing Rehab in a targeted area, from city limits on the north, Columbia Road, 13th Avenue South and Red River, 2% loans structured on ability to pay, amortized - 5 to 10 years depending on household income. $60,000 for Emergency Repair Program with a maximum grant of $3,000 (roof leaking, furnace went out in winter, etc.) and $90,000 for administration or program delivery costs. He stated each agency will perform task best suited - Community Action will administer the housing rehab program and Office of Urban Development will service the loans, the mortgages will be issues in favor of the City and will receive payments and deal with any delinquency issues, once funds are in, will recapture and satisfy the mortgages. He stated this will ultimately come back to this committee after the Citizens Advisory Committee has reviewed it.

Mr. Lund stated they are going from a grant program to a loan program and will heavily market this program; they have set aside 15% as standard adm. but will review this very closely as they market the program; there is $3,000 max. for the emergency grants, with max of $25,000. Mr. Franks stated they try to keep that at about $15,000 to help more households, that they would rather help more with maybe not max. amount of the grant or loan, that they are running a grant program now and some similarities between a grant program and a loan program in terms of actually performing the work, but a whole different set of circumstances in terms of selling the program and getting the money back in.

Hamerlik stated as he looked at salaries and fringes and will this program require a full time person and they are saying it may be more because of the loan program. He stated the amount for administrative expense 15% that will be going out of the $600,000 - that between administrative expense and the grants it comes to about $150,000 so 25% will be non-revolving. Glassheim stated they will only be replenishing 2% cost of the money to the homeowners assuming full payment by everybody, not going to fully recover some.

Mr. Lund stated that over several years hope to capitalize the program and revolve the money in a housing rehab account, they have two choices if have a loan program can bring the money back to the CDBG Program as program income and continually reallocate every year on whatever they think is best or can set aside a revolving loan fund for housing rehab, capitalize it for several years and then let it sit there and revolve and keep doing projects off of the proceeds of the loan. He stated that housing rehab has to be directed to low-income households on a house by house basis and if in a neighborhood you might be able to do several houses on the block depending on who lives there, and is kind of contagious to the rest of the neighborhood.

Mr. Keys stated they had a concern upfront when U.D. came to them - that they had typically targeted the lowest of the low-income homeowners, lot of them elderly and this program will have to have a slightly different twist, and have to go to the upper percentile of the people who are eligible to get that payback because they have clients that can't afford a $40/month repayment; and worries about those people getting help also, and what they agreed with Keith and Greg was to have a set aside where they would go into the house and rather than meeting U.S. Standards or City Code standards would go in and fix one specific problem - if the roof leaks, furnace needs replacing, hot water heat not working, so don't forget that segment of homeowners - that would be a grant (and is from the $60,000 set aside for the lowest of the low-income to do one system or emergency). He stated they were also in agreement that there are some homeowners in the city limits that qualify but are outside of the targeted area, and to have leeway to go and do those so there isn't a backlash against RRVCA or UD, targeted area is pretty much the whole city - and also talked about going farther south than 13th - possibly 17th. Gershman stated that the grant program should be for the whole city-and that this is a test program and if things work, can expand into another area with another $600,000 - will get most of the money back.

Mr. Lund stated in terms of funding if this moves forward and might suggest to city council that now have $600,000 for a loan program and concerned about spending enough money to be timely with HUD, they always have the ability to fund up to $300,000 of next year's money and next year take $300,000 off the top and slide it back into that.

Hamerlik stated if hit the lowest with grant, probably not spending cap of $3,000 for each one but probably $500 to $750 for a lot of those homes. Mr. Keys stated it would vary but agrees with assessment that they wouldn't max out on every house at $3,000, and that they have been doing rehab for about 11 years and in the 4 counties they have served they have rehabbed just short of 300 houses and a lot of those were flood home and other non-flood that they did in conjunction with city and other funding sources in Grand Forks, and the people they have been aiming the grant program at were the lower income people because there was no other help for them, and as switched to the upper echelon those are people they haven[t been seeking out and think there is a market there, they also have a better chance to repay 2% and think there are houses out there to be rehabbed. He stated household income for a 4-person household in city of Grand Forks would be about max. income of $44,650, prior to this discussion they have been targeting that the grant program have a max. income of $27,900 and there is quite a gap.

Greg Hoover stated reason they put $25,000 cap is that once you go beyond that dollar amount, then kick in additional federal lead-based paint regulations and that blows project out of the water, and in previous program they went in and did the Code violation things, things that needed to be fixed, and told homeowner that the rest of this is general improvements and when having to pay for it they begin to rethink and homeowner knows how much he can afford and are they willing to pay that.

Hamerlik stated 2 ad 3% interest makes a lot of difference in the way a perception is there for the non-borrowers. Gershman stated they should recoup inflation and would say 3 or 3.5%. Hamerlik stated to keep it as low as they can and supported 3%.

It was noted that this goes before the Citizens Advisory Committee and come back to the Finance/Development Committee.


Keith Lund stated that if they wanted to do more for the bottom could do a loan program and not require payment and if house sells or alternative, then recapture from sale of the house, option if they need to change course.

Greg Hoover stated that when they talked to Red River he didn't want to be in competition and wanted to play each one of their agency strengths, they do construction things well, and we do the low management well, and other thing that will come up in future years is on the loan servicing, the philosophy he has had and their goal is to keep the people in their house, don't want to foreclose on them if get behind in payments, etc. so work with them and have done cases where they have deferred payments when someone has lost their job, stopped interest, etc. until they go back on their feet and that is philosophy behind this and only as an absolute last resort would ever go in and take somebody's house, and want that to be real clear. Hamerlik stated those that have major setbacks, would agree.

2. City-owned parking lot in Industrial Park
Keith Lund stated in 1997 the City acquired a building owned by American Woods or Wood Products and parking lot adjacent to that facility and used for a community center for individuals occupying temporary mobile homes site by FEMA, and when that use was no longer needed the community center building was converted to an economic development incubator building and over course of several years had 4 or 5 businesses in there, and that the last tenant, . Applied Products owned by Tim Mulvaney, made an offer to purchase the building and Growth Fund accepted and have since sold the property; the City still owns the parking lot. American Woods/American Woods did an expansion project where the City approved a TIF, the addition to the building on the west side of S. 46th Street as well as the parking lot were included in that TIF, and property values have decreased on the Wood Products building so TIF has been paid off more slowly than they anticipated and for that reason that even though the City owned the parking lot, the Growth Fund because of its involvement in the project, has been paying specials and has been paying real estate taxes to help fund that TIF and TIF currently stands at $210,000 and for the last two years an average of $17,000 per year went into that and some interest costs but didn't get that breakdown for this meeting. He stated they have spoken with the owner of Applied Products as well as Mr. Innes from American Woods, discussed properties on the tax rolls - $206,000, about $60,000 lot value and balance in improvement valuation includes the parking lot and a small building, neither have been interested verbally to meet or acquire the property at the assessed value. He stated he was bringing it to their attention to inquire as to whether they believe the city council would have any interest in trying to sell it at a lower rate to get it off of our hands and into private ownership and somebody else paying those real estate taxes. Potential buyers - Applied Products - that they may have some people parking there - it was decided if using it do they need it. Hoover stated person who needs it is Tim Mulvaney, Applied Products, because he is designing his building where he wants to make sure he has access where he would cross the parking lot.

It was noted that this is City owned property - but if gave to the Growth Fund then entertain offer to sell. The committee stated to put it up for sale and to take bids on the lot. Cost to City is $6,900 last year. Keith stated they have to have a public sale, have to establish a minimum bid - bids can be rejected.

After further discussion the committee decided to put the lot up for sale for $206,000 and when put up for sale, and if no bids, close it off and put for sale sign on the property, business shouldn't be allowed to use City property for nothing, esp. businesses that have received benefit from the City. Hoover asked if we go through a bidding process initially and don't get any bids, do we have some additional leeway - Mr. Lund stated that once it has been publicly offered the City can entertain a private sale. It was suggested to put it up for sale and block it off, and notify those who may be interested in it that is what is going to happen - and if putting up for sale closing it to get it ready for sale. It was also noted that in the winter the City clears the lot.

Christensen reported present.

Keith stated he likes the idea of putting it up for sale, with min. bud of $206,000, giving them a month's notice that this is happening, that we have to go through the bidding process and at the conclusion of the bid if have no takers, barricade it and talk to businesses about leasing. He stated to declare the property as surplus to the city council and request to offer property for sale at minimum bid of $206,000.

The committee adjourned at 5:00 p.m.

Alice Fontaine
City Clerk