HomeMy WebLinkAboutCity Council Minutes 11-18-2002 SpecialAdopted Minutes
Joint City Council and HRA Board of Commissioners Meeting
November 18, 2002
Mayor Tierney called the City Council to order at 6:40 p.m. in the Council Chambers of City
Hall, 3400 Plymouth Boulevard on November 18, 2002.
Mayor Tierney informed the City Council and the HRA Board of Commissioners that she had to
leave at 6:45 p.m. and asked HRA Commissioner Henderson to take over chairing the meeting at
that time.
COUNCIL MEMBERS PRESENT: Mayor Tierney, Council Members Black, Hewitt, Johnson,
Slavik and Stein.
ABSENT: Council Member Harstad.
Chair Henderson called the HRA Board of Commissioners to order at 6:40 p.m. in the Council
Chambers of City Hall, 3400 Plymouth Boulevard on November 18, 2002.
BOARD COMMISSIONERS PRESENT: Chairperson Henderson, Board Commissioners
Bildsoe, Hewitt, Ludovissie and Michlitsch.
ABSENT: None.
STAFF PRESENT: City Manager Johnson, Community Development Director Hurlburt,
Housing Program Manager Barnes and Housing Specialist Jones.
OTHERS PRESENT: Greg Finzell, Executive Director of the Rondo Community Land Trust
and Terry Egge, President of the West Hennepin Affordable Housing Land Trust Board of
Directors.
Presentation - Community Land Trusts
Housing Program Manager Barnes introduced the land trust speakers, Greg Finzell, Executive
Director of the Rondo Community Land Trust and Terry Egge, President of the West Hennepin
Affordable Housing Land Trust (WHAHLT) Board of Directors.
Mr. Finzell started his presentation by providing some basic information on land trusts. He stated
that land trusts are a tool to provide affordable housing that is permanently affordable. He
explained that the land trust option can work for either new or existing housing and that the land
trust owns the land and the family owns the house. He also explained that the family agrees to
sell to another family at 80% or less of median income. Mr. Finzell explained that when a family
sells a land trust home, the family receives a percentage (Rondo uses 25% and WHAHLT uses
35%) of the appreciated value. Thus, the family is able to walk away with a portion of the
appreciated value and the house remains affordable to another low or moderate -income family
without any additional subsidy needed. Since its creation, Rondo has provided 14 affordable
Adopted Minutes
Joint City Council and HRA Board of Commissioners Meeting
November 18, 2002
Page 2
housing units with no foreclosures and one resale. Mr. Finzell explained that the Rondo Land
Trust serves families at 50 - 80% of median income. He explained that these families are
purchasing a house through the trust that they could otherwise not afford. Mr. Finzell also
explained that they use a "best practices" approach to housing repairs. Thus, if any major
component of the house doesn't have a 5 - 7 year life the trust will replace or repair it prior to
selling it.
Ms. Egge explained that the West Hennepin Affordable Housing Land Trust began as a City of
Minnetonka initiative in 1999 with the trust receiving their non-profit status in 2001. Ms. Egge
stated that they have already provided 8 affordable housing units to the area and that these were
all single-family homes on larger lots. She stated that they work with primarily first time
homebuyers who cannot afford any down payment of closina costs. The amount of subsidy
varies, however the maximum purchase price for the land trust is $190,000 and the typical resale
price is $110,000 - $120,000 depending on what the family can afford. She stated that location is
an important consideration, especially the proximity to bus routes. Ms. Egge also stated that their
annual operating costs range between $100,000 - $120,000 with a majority of these expenses
funded through a combination of private and public funding sources.
Question and Answer Session
Council Member Johnson questioned the resale process. She also questioned whether either of
the land trusts have dealt with any resales yet and if so, whether the families walked away with
enough money to buy another comparable home.
Mr. Finzell stated that the Rondo Land Trust has a limited broker's license. He also added that
the Rondo Land Trust has had one sale to date. The family lived in the house for three years.
When the family sold their house, they received 25% of the appreciation value or $9,000.00.
Council Member Johnson questioned how the land trust reacts to rising interest rates.
Mr. Finzell stated that they take each family individually and that they try to be creative with
their funding resources.
Council Member Johnson questioned whether or not the land trust could function if interest rates
go up.
Mr. Finzell stated that they would write down the purchase price of the house more if necessary
to compensate for the higher interest rates.
Commissioner Henderson questioned whether the homes are sold back to the land trust or sold
directly to other families.
Mr. Finzell stated that they are sold directly from one family to the next.
Adopted Minutes
Joint City Council and HRA Board of Commissioners Meeting
November 18, 2002
Page 3
Commissioner Bildsoe questioned how the families, on the waiting lists are found and whether or
not certain families are given preference.
Mr. Finzell stated that they find eligible families through advertisements and word of mouth. He
also added that preferences are given for certain items, including but not limited to: household
size, need and income.
Ms. Egge stated that finding eligible families is difficult and that they've hired a consultant.to
make the process easier. She also added that they try to match the family with the house and use
a lottery system if necessary.
Coin cil Member Stein questioned whether a down payment was require,-,.
Ms. Egge stated that a down payment is always required but the land trust is typically able to
subsidize both the down payment and closing costs for the families.
Council Member Black questioned why both Rondo and WHAHLT obtained non-profit status
instead of partnering with another organization that already had this status.
Ms. Egge stated that it was easier to exist as their own non-profit agency.
Council Member Black questioned where operating costs for the land trust comes from.
Mr. Finzell stated that Rondo covers its operating costs through donations from foundations and
non -profits organizations plus a minimal developer fees that they charge.
Ms. Egge stated that WHAHLT covers its operating costs through donations from cities,
churches and non -profits organizations.
Mayor Tierney questioned who is responsible for home maintenance costs.
Mr. Finzell stated that the families are ultimately responsible for maintenance. However, since
the families have an incredible amount of pride in their homes, deferred maintenance has not
been a problem.
Council Member Johnson questioned whether the lenders require the families to escrow funds
for property taxes.
Mr. Finzell stated that the lenders do not require the families to escrow funds for taxes but that
they strongly encourage it.
Council Member Johnson questioned whether mortgage insurance could be waived to increase
affordability.
Adopted Minutes
Joint City Council and HRA Board of Commissioners Meeting
November 18, 2002
Page 4
Mr. Finzell stated that waving mortgage insurance may be a possibility soon but until now the
homeowners have had to pay it.
Council Member Johnson questioned whether closing costs could be waived to increase
affordability.
Ms. Egge stated that this is a possibility in the near future but they are still negotiating with a few
title companies on this matter.
Council Member Johnson questioned whether it is economically beneficial for the families to
make large improvements or add an addition to the home.
Mr. Finzell stated that the Rondo Land Trust encourages improvements and the families are
compensated for these improvements. He explained that a dollar amount is determined for the
improvement after it's completed. Once the dollar amount is determined, this figure is added to
an addendum on the ground lease. Thus, when the family sells their home they receive 25% of
the appreciated value of the home, plus the dollar amount listed on the addendum to the ground
lease.
Council Member Stein questioned whether a family would receive the construction cost or
appreciated value of an addition or major improvement.
Mr. Finzell stated that a project appraisal would be done at the time the addition or improvement
is completed. Upon resale the family would receive the project appraisal figure plus 25% of the
appreciation value of the home, including the addition or improvement.
Ms. Egge stated that the homes are sold in move in condition, so the families don't have to make
any major repairs right away.
Council Member Johnson stated that if her family didn't benefit from the full equity they have
gained in the homes they have owned over the years that they wouldn't be where they are today.
Mr. Finzell stated that land trusts are a tool for long-term housing affordability but it is not the
right choice for everyone.
Council Member Johnson questioned whether the equity percentages could be adjusted if the
City of Plymouth decided to work with WHAHLT.
Ms. Egge stated that she couldn't answer the question specifically for the resale value but that in
general WHAHLT tries to be as flexible as possible.
Community Development Director Hurlburt questioned the average subsidy per house.
Adopted Minutes
Joint City Council and HRA Board of Commissioners Meeting
November 18, 2002
Page 5
Mr. Finzell stated that the average initial subsidy for the Rondo Land Trust is currently $50,000
to $65,000 per unit.
Ms. Egge stated that WHAHLT put $88,000.00 of subsidy into one of the houses but she did not
have figures for the other ones.
Council Member Stein questioned what happens when the house needs repairs.
Mr. Finzell stated that the Rondo Land Trust currently offers a 10 -year low interest loan program
for families to use for home repairs. However, with some new programs in the works through
MHFA and a few major banks, the families may be able to use these programs instead of the
existing land "ist program. Tf thithehappens, e trust may be able to discontinue the existing loan
program.
Commissioner Ludovissie questioned how the land trust prevents the families from deferring
housing maintenance.
Mr. Finzell stated that staying in contact with the owners is the key to preventing deferred
maintenance.
Ms. Egge stated that there is a fine privacy line that the trust has to be careful not to cross.
Council Member Hewitt questioned how land trusts find potential land and/ or rehabilitation
properties.
Ms. Egge stated that unless the land and/or properties are donated, WHAHLT uses a real estate
agent and they purchase the land and/or properties on the open market.
Mayor Tierney questioned whether we are really helping these families or just providing them
with a modified rent program. She also questioned where the 75% goes.
Mr. Finzell stated that in reality the 75% only exists on paper. He also stated that when a land
trust home is sold to a new family, the purchase price is determined by subtracting the 75%
figure from the appraised value.
Council Member Hewitt questioned whether the land trust monitors the homes on a regular basis
to make sure they are being kept up.
Mr. Finzell stated that the land trust does not monitor the homes on a regular basis.
Council Member Johnson questioned whether the families could obtain an equity line of credit to
pay for college expenses.
Adopted Minutes
Joint City Council and HRA Board of Commissioners Meeting
November 18, 2002
Page 6
Mr. Finzell stated that this wasn't a possibility yet. He also stated that equity lines of credit are
available for eligible home improvements but not for other reasons, such as college expenses.
Mayor Tierney questioned how land trusts compare with other affordable housing tools..
Mr. Finzell stated that it's another affordable housing tool but it is not meant to take the place of
existing programs such as Section 8 rental housing.
Council Member Black thanked Mr. Finzell and Ms. Egge for speaking at the meeting.
Commissioner Ludavisse questioned the ability of the land trust to purchase the homes back over
time.
Mr. Finzell stated that the land trust does have the right of first refusal with a willing buyer. He
also stated that in the event of foreclosure the trust also has the right of first refusal to buy the
house.
Adiournment
Motion was made by Commissioner Henderson and seconded by Council Member Black to
j adjourn the meeting at 8:20 p.m. With all members voting in favor, th otion carried.
Sandra R. Paulson, City Clerk
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