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HomeMy WebLinkAbout1989-03-06 HRA Regular Meeting MINUTES EDINA HOUSING AND REDEVELOPMENT AUTHORITY MARCH 6, 1989 Answering rollcall were Commissioners Kelly, Paulus, Rice, Smith and Richards. MINUTES of the Joint HRA/Council Meeting of February 21, 1989 were approved as submitted by motion of Commissioner Smith, seconded by Commissioner Kelly. Ayes: Kelly, Paulus, Rice, Smith, Richards Motion carried. CONVEYANCE OF PHASE I CENTENNIAL LAKES CONDOMINIUMS AUTHORIZED. Executive Director Hughes recalled that at the last meeting the Council had asked for additional details concerning the Centennial Lakes Condominiums project prior to authorizing the conveyance of the Phase I condominium site. Specifically, the HRA requested details concerning the second mortgage program and sales policies. He ve summarized the requirements that have been imposed through the redevelopment agreements executed in October, 1988, as foll ows: HRA Requirements - 80% of the condominium units must be sold to low and moderate income persons. Low and moderate income presently defined as household income of $40,700 annually or less. East Edina Housing Foundation Requirements - Sales Terms: Principal amount of second mortgage cannot exceed 40% of sale price; Minimum down payment of 5% (may be less if approved by VA or FHA) ; Second mortgage amount is determined as if buyer first qualified for maximum first mortgage; Owner occupancy is required; Only units selling for $90,000 or less qualify for second mortgages; Edina preference (all things being equal, a buyer who lives, works or originally came from Edina is favored over another buyer) . Second Mortgage Terms: Interest rate is 5% simple, non-compounded; Term of the second mortgage is equal to the term of the first mortgage; The second mortgage is assumable for the first five years of the mortgage; Monthly payments are not required but the principal amount and accrued interest are due on sale of the unit. Special Foundation Policies: Co-signers or guarantors of the first mortgage are permitted, however, second mortgages are limited to $5,000 in such cases; Assets are limited to $25,000 excluding an automobile and down payment in order to qualify for a second mortgage; First mortgage refinancing is permitted without repayment of the second mortgage provided that no cash is realized from the refinancing. Director Hughes explained that within those broad parameters the housing developer then has the latitude to market the units and specifically design the mortgage program to fit certain buyers. Also presented were: 1) a pre-construction price list for the condominiums showing the array of units, unit types and floor areas; 2) the second mortgage matrix showing the various units matched up with the income characteristics of the buyers, and further matched up with the second mortgages proposed; and 3) the profile of individuals who have reserved units at Centennial Lakes to date. Member Kelly expressed the following concerns: 1) How do we know the second owner is a low/moderate income person on assumption of the mortgage, 2) Is an inspection made on a roll-over to insure that the property has been well maintained, 3) That the established 5% interest on the second mortgage is tracking with inflation, 4) That this was done to encourage young people to come back to Edina and that, philosophically, the second mortgage should be paid off before the owner goes on to something else, and 5) That the second mortgage money pool continues to build so that it could be used for an owner wanting to buy a single family home in Edina. In response, Director Hughes explained that on an assumption the buyer is required to complete an income certification worksheet that is presented to the Foundation based on the same qualifying characteristics as the original buyer had to furnish. The Foundation then has to sign an assumption agreement that allows the mortgage to be rolled over to the new buyer. If the new buyer does not qualify the second mortgage loan would have to be repaid. No inspection is made on an assumption of the mortgage. As to the 5% interest rate, the intent was to permit the assumption for the first five years from the date of the original second mortgage. After that the Foundation would want to review the terms again to see if new mortgages to be issued should have a higher interest rate. Member Smith asked Larry Laukka, the developer, if any H.R.A. Minutes March 6, 1989 Page Two special planning has been done to provide for recycling by owners of the condominiums. Mr. Laukka said that they started the recycling program at Edinborough and that they plan to carry that into the Centennial Lakes development by locating trash areas in the garages in each of the buildings. Although it takes some educating, experience at Edinborough shows that recycling does work. Member Smith then asked Mr. Laukka if, as the developer, he could continue to watch to be sure that the units are maintained in good condition. Mr. Laukka explained that there are no provisions for inspection but that the market rate tends to take care of that. If, in fact, someone abuses their property it typically does not sell or would sell for something considerably less. There is no good answer except to franchise or license someone to come in prior to an assumption and do an inspection. Member Smith said he was concerned about two things, that there be earnings and not losses and that the moneys come back in to repay the debt initially and then the proceeds can be used to do other enhancements within Edina through the East Edina Housing Foundation. Mr. Laukka said there were two philosophical questions a few years ago, one of which was regarding the money coming back into the pool and was that good business. He said it was concluded that it was because it would create a mortgage pool for subsequent users whether they were in this development or some other one. The second question was should the City be in the posture of trying to make money on the second mortgages, e.g. should it be charging a market rate and have that pool grow. It was concluded that we should see that the integrity of the principal was retained but not be in the business to make money. Mr. Laukka said that could change if the Council so wished. Member Rice asked 1) Who looks at the second mortgage application on a re-sale, 2) Do the requirements imposed by the HRA and the East Edina Foundation parallel those of the Edinborough project, and 3) What servicing problems have experienced. Director Hughes replied that there is a servicing agreement with United Mortgage. They review the income certification worksheet and give an opinion as to whether the applicant qualifies or not. As to the requirements, they are identical to those of Edinborough. Servicing has been time consuming for staff in keeping up with questions that are asked, but in terms of technical problems with assumptions they have gone well. He added that with Centennial Lakes as units come on line the Foundation probably would be wise to look at hiring a parttime individual, e.g. a retired real estate broker, who would be familiar with the project and who could handle ombudsman type duties. Mayor Richards then asked for any comments or questions from the public. None being heard, Commissioner Smith introduced the following resolution and moved adoption: RESOLUTION RATIFYING AND AUTHORIZING THE EXECUTION AND DELIVERY OF VARIOUS DOCUMENTS BE IT RESOLVED by the Board of Commissioners of the Housing and Redevelopment Authority of Edina, Minnesota (the "HRA"), as follows: 1. Recitals. The HRA and the Edina City Council have previously approved a redevelopment plan, as defined in Minnesota Statutes, Section 462.421, subdivision 15, designated as the Southeast Edina Redevelopment Plan, and have approved various amendments thereto (as so amended, the "Redevelopment Plan"). Acting pursuant to the Redevelopment Plan, the HRA has acquired certain land in the area included in the Redevelopment Plan and it has been proposed that the HRA sell and transfer a portion of such land to the East Edina Housing Foundation (the "Foundation"), pursuant to a Land Sale Agreement by and between the HRA and the Foundation (the "Agreement"). By a resolution adopted March 7, 1988, the HRA approved the form of the Agreement and authorized any two officers of the HRA to execute and deliver the Agreement on behalf of the HRA with such modifications as were deemed appropriate and approved by the Chairman and the Executive Director of the HRA. Pursuant to such authorization the Chairman and Vice Chairman of the HRA executed and delivered the Agreement dated on or as of March 14, 1988. Subsequently, by resolution dated September 12, 1988, the HRA approved execution and delivery by any two officers of the HRA, on behalf of the HRA, of an Amended and Restated Land Sale Agreement and Contract for Private Redevelopment between H.R.A. Minutes March 6, 1989 Page Three the HRA and Foundation with such modifications as the attorney for the HRA and Executive Director of the HRA should approve (the "Amended Agreement") . Pursuant to such authorization the Chairman and Secretary of the HRA executed and delivered the Amended Agreement dated on or as of September 30, 1988. In connection with the transactions contemplated by the Amended Agreement, it is now proposed that Phase I of the Condominium Development be commenced on the property described on Exhibit A hereto (the "Phase I Condominium Property") and that the Phase I Condominium Property be conveyed pursuant to the Amended Agreement. 2. Ratification. The execution and delivery of the Amended Agreement dated on or as of September 30, 1988, by the Chairman and Secretary is hereby affirmed. 3. Authorization for Execution and Delivery of Documents. Any two officers of the HRA are authorized and directed to execute such instruments and agreements as may be required or be desirable to accomplish the conveyance of the Phase I Condominium Property pursuant to the Amended Agreement. The execution of such instruments and agreements by any two officers of the HRA shall be conclusive evidence of the approval of such documents by the HRA in accordance with this Resolution. EXHIBIT A THE HOMES AT CENTENNIAL LAKES PHASE I CONDOMINIUM LAND DESCRIPTION All that part of LOT 1, BLOCK 2, SOUTH EDINA DEVELOPMENT ADDITION, according to the recorded plat thereof, Hennepin County, Minnesota, described as follows: Beginning at the southeast corner of said LOT 1, thence on an assumed bearing of North 00 degrees 14 minutes 09 seconds West, along the easterly line of said LOT 1 for 100.00 feet; thence North 18 degrees 11 minutes 57 seconds East, along said easterly line for 47.23 feet; thence South 89 degrees 45 minutes 51 seconds West for 148.64 feet; thence North 45 degrees 14 minutes 09 seconds West for 35.67 feet; thence North 00 degrees 14 minutes 09 seconds West for 37.79 feet; thence South 89 degrees 45 minutes 51 seconds West for 143.93 feet to the westerly line of said LOT 1; thence South 00 degrees 14 minutes 09 seconds East, along said westerly line for 146.64 feet; thence South 35 degrees 08 minutes 34 seconds East for 154.42 feet to the southerly line of said LOT 1; thence North 56 degrees 15 minutes 46 seconds East, along said southerly line for 5.00 feet; thence easterly for 222.69 feet along said southerly line on a tangential curve concave to the south, radius 377.50 feet and central angle 33 degrees 47 minutes 55 seconds, to the point of beginning. Dated as of the 6th day of March, 1989. ATTES � Chairman �—t Executive biie c or Motion for adoption of the resolution was duly seconded by Commissioner Rice. Discussion followed on the issue of whether or not the Council should recommend that there be an inspection of the property on a mortgage assumption or roll-over. It was concluded that the majority of the Commissioners did not support any type of inspection. It was agreed also that staff should bring back to the Council a recommendation if it felt there was a need for some type of administrative help with regard to assumptions. Chairman Richards then called for rollcall vote on the motion. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Resolution adopted. H.R.A. Minutes March 6, 1989 Page Four EXTENSION OF OPTION FOR EDINBOROUGH OFFICE PHASE II APPROVED. Executive Director Hughes referred to a letter from Thomas W. LaSalle on behalf of the Edina Partnership (the Edina Partnership was the original development entity for Edinborough) . Mr. LaSalle's letter requested an extension to the partnership's development rights for the Edinborough Phase II Office Site until at least December 31, 1989 and more practically until March 31, 1990. He explained that until quite recently, the Partnership believed that their development rights were in effect until March 31, 1992. Therefore, the Partnership has not appeared earlier to request the extension. The Partnership is presently working with Hawthorne Suites for the purpose of presenting to th e City a proposal for an extended stay hotel on the site. It is expected that Hawthorne Suites will submit preliminary plans for Planning Commission review sometime in April. Staff agrees that the termination date as provided for in our redevelopment agreements is somewhat ambiguous. It is understandable that the Partnership could have concluded that their option did extend until March of 1992. Staff believes that the requested extension until December 31, 1989 is reasonable and should be approved by the HRA. Commissioner Kelly said she would be concerned that, if in passing the land to Hawthorne Suites, the City would not be the benefactor; also that what the HRA had approved for the site was the office building. Director Hughes said that the transfer could not happen without a separate action by the HRA. Commissioner Smith asked if the hotel would be a use that is approved for the site. Director Hughes explained that two things would have to happen to permit that use: 1) Amendment of the Zoning Ordinance to permit the hotel use in the Mixed Development District, and 2) Approval of the Final Development Plan by the Planning Commission and the Council whereby the change for the site would be approved. Commissioner Rice said it was his understanding that there is no bargain here for the Edina Partnership because of the extension and that they are pursuing a development that many think would be beneficial. No further comment being heard, Commissioner Smith introduced the following resolution and moved adoption: RESOLUTION EXTENDING OPTION FOR EDINBOROUGH OFFICE PHASE II BE IT RESOLVED by the the Board of Commissioners of the Housing and Redevelopment Authority of Edina, Minnesota that it hereby approves extension of the option to March 31, 1989, for Edinborough Office Phase II; BE IT FURTHER RESOLVED that the Chairman and Secretary of the HRA be authorized and directed to execute such instruments and agreements as may be required to accomplish the extension. Motion for adoption of the resolution was seconded by Commissioner Rice. Rollcall: Ayes: Kelly, Paulus, Rice, Smith, Richards Resolution adopted. There being no further business on the HRA Agenda, motion was made Commissioner Kelly and was seconded by Commissioner Paulus for adjournment otion carried. Exec t' e Director