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021317 EDA Meeting Packet    EDA MEETING  City Hall, 4401 Xylon Avenue North  Monday, February 13, 2017    Commences upon adjournment of the City Council Meeting  Agenda    President Kathi Hemken  Commissioner John Elder  Commissioner Andy Hoffe  Commissioner Eric Lammle  Commissioner Jonathan London      1. Call to order – EDA Meeting of February 13, 2017      2. Roll call      3. Approval of Minutes:   January 23, 2017      4.  Resolution approving Purchase Agreement for the acquisition of 3984 Zealand  Avenue North (project no. 997)      5. Adjournment        EDA Meeting   Page 1 January 23, 2017  CITY OF NEW HOPE  4401 Xylon Avenue North  New Hope, Minnesota 55428    EDA Minutes January 23, 2017  Regular Meeting City Hall      CALL TO ORDER President Hemken called the meeting of the Economic Development Authority  to order at 7:46 p.m.    ROLL CALL Present:          Kathi Hemken, President  John Elder, Commissioner  Andy Hoffe, Commissioner  Eric Lammle, Commissioner  Jonathan London, Commissioner     Staff Present:      Tim Fournier, Police Chief  Valerie Leone, City Clerk  Chris Long, City Engineer  Susan Rader, Director of Parks and Recreation  Jeff Sargent, Director of Community Development  Bernie Weber, Interim Director of Public Works  Stacy Woods, Assistant City Attorney    APPROVAL OF  MINUTES  Item 3  Motion was made by Commissioner Hoffe, seconded by Commissioner  London, to approve the minutes of December 12, 2016. All present voted in  favor. Motion carried.    CEE HOME ENERGY  SQUAD VISITS  Item 4  President Hemken introduced for discussion EDA Item 4, Resolution  approving agreement with Center for Energy and Environment to perform  Home Energy Squad Visits and Home Energy Squad Enhanced Visits in the  city of New Hope through December 31, 2019.    Mr. Jeff Sargent, director of community development, stated the resolution  approves an agreement with the Center for Energy and Environment to  continue the Home Energy Visits program through December 31, 2019. He  explained the EDA authorized the initiation of this program in January of 2013  and renewed the contract in 2015. He stated CEE performs visits to help  homeowners identify and implement energy savings opportunities in their  homes, and the program includes the direct install of energy saving materials  which probably exceeds the $50 fee.     Members of the EDA provided positive comments regarding the program.  Commissioner London inquired of the usage. Mr. Sargent reported 124  residents took advantage of the program in the first two years, and he estimated  the number to be about 30 homes per year for the past two years. He stated he  would obtain the actual figures for the years 2015 and 2016 and relay the  information to the EDA.      EDA Meeting   Page 2 January 23, 2017  RESOLUTION 2017‐01  Item 4  Commissioner London introduced the following resolution and moved its  adoption “RESOLUTION APPROVING AGREEMENT WITH CENTER FOR  ENERGY AND ENVIRONMENT TO PERFORM HOME ENERGY SQUAD  VISITS AND HOME ENERGY SQUAD ENHANCED VISITS IN THE CITY  OF NEW HOPE THROUGH DECEMBER 31, 2019”. The motion for the  adoption of the foregoing resolution was seconded by Commissioner Hoffe,  and upon vote being taken thereon, the following voted in favor thereof:  Hemken, Elder, Hoffe, Lammle, London; and the following voted against the  same: None; Abstained: None; Absent: None; whereupon the resolution was  declared duly passed and adopted, signed by the president which was attested  to by the executive director.    ADJOURNMENT Motion was made by Commissioner London, seconded by Commissioner  Hoffe, to adjourn the meeting. All present voted in favor. Motion carried. The  New Hope EDA adjourned at 7:50 p.m.    Respectfully submitted,    Valerie Leone, City Clerk    I:\RFA\COMM DEV\Development\Q & R 3984 Zealand Acquistion 2‐13‐17.docx   Request for Action February 13, 2017    Approved by: Kirk McDonald, City Manager  Originating Department: Community Development  By: Aaron Chirpich, CD Specialist    Agenda Title  Resolution approving Purchase Agreement for the acquisition of 3984 Zealand Ave N (project no. 997)  Requested Action  Staff requests the EDA authorize entering into a Purchase Agreement for the acquisition of 3984 Zealand  Avenue North, for $165,000 (purchase price) plus any associated fees.  Policy/Past Practice  In the past, the EDA has successfully acquired vacant and distressed properties as part of the city’s  scattered‐site housing program.  Background  The EDA has directed community development staff to pursue the acquisition of distressed single‐family  homes. For the past two years, the EDA has focused on homes that were candidates for demolition. During  this time, the EDA has purchased seven homes that have been razed to make room for the construction of ten  new homes. Staff remains committed to finding additional opportunities for demolition. However, these  properties have become more difficult to acquire for a variety of reasons. The primary barrier is lack of  inventory, as the EDA has purchased many of the worst single‐family nuisance properties available in the  city. Secondly, the market for distressed properties has become much more competitive. This competition has  led to a rise in prices that has coincided with an improving economy.    These market forces have led staff to research opportunities within the rehabilitation sector, as staff have  identified what staff considers a market failure. As acquisition prices have risen, the back‐end sales value of  the newly rehabilitated homes has not kept pace. In other words, investors are paying more for distressed  properties, and completing fewer improvements on each project. This provides an opening for the EDA to  produce what should be a better product. The EDA is motivated by improving neighborhoods, rather than  profit. As such, the EDA has the ability to invest more money into each project, with the goal of breaking  even. For example, staff have observed several recent “flips” within the city where very few exterior  improvements have been completed. Often times, the exterior amenities such as siding, windows, and  roofing remain untouched, as they are expensive to replace. This is an area where staff see a chance for the  EDA to make headway. The portion of the project that would typically go to investor profit can now be  applied to improving the appearance of these homes from the curb. Exterior improvements have the biggest  impact on the so‐called “keeping up with the Joneses” effect that staff want to stimulate in the city’s core  neighborhoods.    3984 Zealand  3984 Zealand is a vacant and foreclosed property that was part of an estate. The former owners had secured a  reverse mortgage on the home before passing away. The home has received very few upgrades since it was  built in 1964, and suffers from a lack of general maintenance. Despite its deficiencies, it remains a solid home  Agenda Section EDA Item Number 4    Request for Action, Page 2    with enough positive attributes to build off. As such, staff recommend acquiring this home in order to  complete a demonstration project. Staff feels that the timing is right to enter this market and begin investing  in rehabilitation opportunities. The highlights of work that staff would like to complete on the home include:     New roof, siding, windows and overhead garage door   New kitchen   Re‐condition existing hardwood floors   Re‐model the master bath   Gut main bath and replace with new fixtures   New interior doors and trim   Fresh paint throughout   New carpet in lower level    3984 Zealand was offered for sale with a list price of $150,000. After viewing the property, staff submitted an  offer of $157,000 in anticipation of heavy competition for the home. Staff were notified two days later that the  seller had received multiple offers, and was requesting the “best and final” offer from each interested buyer.  Staff responded by increasing the EDA’s offer to $165,000, and the seller accepted. The offer submitted is  contingent upon EDA board approval.  A full project budget is attached to this RFA.  Funding  Staff recommend using EDA funds for this project, as the goal is to recapture the EDA’s investment through  the sale of the home. With no anticipated loss, the EDA can avoid the use of CDBG grant funds that come  with income restrictions for the back‐end buyer. This means that the EDA can sell the home to anyone  regardless of income. Staff feel that this approach will allow the EDA to maximize the value/sales price of the  home.    Recommendation  Staff is seeking approval of the acquisition of 3984 Zealand Avenue. Staff recommends the EDA approve the  attached resolution prepared by the City Attorney and the terms of the attached purchase agreement.    Attachments   Resolution   Project budget    Location map   MLS listing for the property   Purchase agreement    CITY OF NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY EDA RESOLUTION NO. 17- RESOLUTION APPROVING PURCHASE AGREEMENT FOR THE ACQUISITION OF 3984 ZEALAND AVENUE NORTH (project no. 997) BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope (“EDA”) as follows: WHEREAS, on September 22, 2014, the City Council adopted Resolution No.14-126 at the City Council meeting authorizing City community development staff to actively pursue the acquisition of distressed single family homes for potential purchase by the EDA, as part of the City’s scattered site housing program; WHEREAS, the City Council has directed City staff to negotiate for the terms most favorable to the City and EDA, and the execution of purchase agreements so as to secure purchase rights for these real properties, contingent on the review and approval of the EDA to the terms of the purchase agreements; WHEREAS, City staff have identified the opportunity to purchase certain real property which has been foreclosed upon located at 3984 Zealand Avenue North, New Hope, MN, P.I.D. 18-118-21-42- 0041, and legally described as: Lot 10, Block 2, Hipp’s Hopewood Hills Revised Addition, Hennepin County, Minnesota (the “Property”) from The Bank of New York Mellon, as Trustee for Mortgage Equity Conversion Asset Trust 2010-1 (“Seller”); WHEREAS, the Property is currently unoccupied; WHEREAS, the house located on the Property was built in 1964, and while suffering from a lack of general maintenance and upgrades, is a solid home that City staff believes could be rehabilitated; WHEREAS, City staff believes that the best use of the Property is rehabilitation and renovation; WHEREAS, the Property will be acquired with EDA funds; WHEREAS, it is in the best interest of the EDA to purchase the Property from Seller, in order to rehabilitate the Property in accordance with the City’s scattered site housing program and policy; and WHEREAS, City staff is hereby seeking approval from the EDA of the Purchase Agreement, subject to the review and approval by the City Attorney of proper title evidence and other terms relating to the closing on the sale of the Property. NOW, THEREFORE, BE IT RESOLVED by the Economic Development Authority in and for the City of New Hope as follows: 1. That the above recitals are incorporated herein by reference. 2. It is in the best interest of the EDA to purchase the Property for rehabilitation in accordance with the City’s scattered site housing program and policy. 3. That the purchase of the Property by EDA from Seller, for a sum of $165,000.00, with other terms and conditions as set forth in the Purchase Agreement attached hereto as Exhibit A, is approved subject to the review and approval by the City Attorney of proper title evidence and other terms relating to the closing on the sale of the Property. 4. The City and EDA shall use due diligence for rehabilitating the Property’s condition and conducting any necessary renovations and cleanup of the Property to pursue this rehabilitation purpose and return the Property to the tax rolls for the benefit of all taxing jurisdictions. 5. The President and Executive Director and the New Hope City staff are authorized and directed to sign all appropriate documents, and to take whatever additional actions are necessary or desirable, to complete the purchase of the Property in accordance with the Purchase Agreement. Dated the _____ day of February, 2017. ____________________________________ Kathi Hemken, President Attest: _____________________________ Kirk McDonald, Executive Director City of New Hope Single-Family Acquisition and Rehab-- Scattered Site Housing Program Total Project Cost and Total Funding Sources 3984 Zealand Avenue New Hope MN, 55427 USES Amount Acquisition 165,000 Rehab/Construction 65,885 Real Estate Taxes 3,115 Current Tax Value $187,000 Legal 1,500 Current Property Tax $3,115 Listing Fee 13,000 Closing, Recording Fees 1,500 Estimated Tax Amount "after rehab" $4,200 "based on a value of $255,000" Contingency 5,000 Total 255,000 SOURCES Amount EDA 255,000 Total 255,000 Anticipated Sales Price 255,000