Workshop Item - Elizabeth Showalter, Community Development Specialist
Title
Title
Housing Improvement Area Policy
end
Background
At the April 4, 2022 City Council workshop, the Council considered a request by the Parkshire Woods Home Owners Association to have a Housing Improvement Area (HIA) established to finance repairs caused by water damage. At that meeting, the Council indicated an interest in adopting a policy governing HIAs, but had questions and concerns regarding the specific request. At this time, staff has prepared a draft policy for council review. An overview of HIAs prepared by the Minnesota House Research Department is attached.
Key elements of the policy:
1. Require a petition by at least 60% of property owners be submitted with the application fee (state statute requires 50%).
2. Establishes approval criteria, including:
a. The proposed project must meet goals, including promoting neighborhood stabilization and revitalization, correct housing or building code violations, maintain or obtain FHA mortgage eligibility, preserve, or increase property values, preserve affordable housing, and stabilize owner occupancy.
3. Applicant must demonstrate no other financing is available.
4. The project must bring the property into compliance with property standards.
5. Project must be in the public interest.
6. Project and financial structure must be reviewed favorably by the Finance Director, City’s Municipal Advisor (Baker Tilly), and legal counsel.
At the workshop, one of the primary concerns raised by members of the Council was the financial risk to the City and the size of the request in relation to the value of the units. Staff has been in discussions with other cities that receive frequent requests for HIAs. No other cities included a debt-to-value limit in their policies but did have that as a consideration in their review of individual requests. One city had denied an HIA request that would have resulted in assessments larger than the value of the homes, and another city had approved a request that had a 60% loan-to value-ratio. Staff is consulting with Baker Tilly to determine whether the policy should include a limit on debt-to-value.
The policy establishes a minimum project cost to ensure it is worth the work of the City to establish the HIA. The policy can also establish a maximum project cost. Most cities do not incorporate a maximum, but would review the impact to the city’s finances as part of the application review. Staff is consulting with Baker Tilly to determine whether they recommend a cap on project cost.
If the City Council elects to adopt the policy, the Parkshire Woods HOA could pay the application fee and apply. Review of the application would include an assessment of risk by Baker Tilly and review of the application by staff and legal counsel. The City Council would then hold a public hearing and consider the request, and would need to adopt an ordinance to create the HIA or deny the request.
Staff Recommendation
Discuss the policy. If council is in favor of the policy, the next step would be adoption of the policy by the City Council.
Attachment List
Draft Policy
Housing Improvement Area Overview