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HomeMy WebLinkAbout6. Small Cities Development Program (SCDP) Update #G CITY OF SHAKOPEE CO~S E'tJT Memorandum TO: Economic Development Authority Mark McNeill, EDA Executive Director Economic Development Advisory Committee FROM: Paul Snook, Economic Development coordinat~ SUBJECT: Small Cities Development Program (SCDP) Update DATE: July31, 2003 Enelosed is the July 2003 update on the Small Cities Development Program (SCDP) from the Carver County HRA. In summary, the HRA reports the following SCDP funding activity: Amount % of Funds Amount Committed/ Committed/ Balance Max Avail per Funded Allocated Allocated Available Property or Unit Single Family Residential (goal: 30 units) $369,000 $433,622 117% - $64,622 $19,000 + $46.116 (transfer from cornel) $0 Rental Residential (goal: 30 units) $121,500 $172,112 142% $-50,612 $10,000 + 50,612 (transfer from cornel) 0 Commercial (goal: 15 units) $251,250 $91,460 36% $159,790 $25,000 - $ 64,622 (t'fer to s-fam) $ 50,612 (t'fer to rental) $ 44,566 TOTAL $741,750 $697,194 94% $44,556 UpdateJul03.doc 1 8/1/2003 Small Cities Shakopee Rehab Program In last month's report, we mentioned that all single-family, rental and commercial loan applications have had their loan closings for the Shakopee Small Cities program. We are happy to report that two rental applications that were not meeting the program requirements have since become eligible for a single-family loan and a combination loan of rental and commercial. Both applicants' properties are located in an area that is zoned commercial but has single-family dwelling units and therefore they could not create a duplex and 4-plex like they had wanted. So, the property owners changed their plans (as described below) and were able to utilize the funding in other ways. We were successful at committing all of the single family and rental rehab loan funds allocated, plus additional funding from the commercial program was transferred to these programs. The commercial portion of the program was in less demand than the residential programs even after meeting with commercial property owners one-on-one and several marketing efforts. However, with the 50% match requirement, this program was a tougher sell. Both the rental rehab and single family rehab had attractive loan programs that the Carver HRA could offer that required little or no interest, some are even forgivable, that applicants could tap into for their match. Furthermore, there was commercial property owners preferred to use contractors that did not fall within prevailing wage guidelines (a federal requirement), and many of the commercial loan beneficiaries did not utilize the maximum loan amounts of $25,000. 2 applicants utilized the full $25,000, while the remaining applicants utilized $3000, $7000, $12,000 and $17,000 respectfully. However, the HRA feels that this was an extremely successful project. Only 6% of the rehab funds will be retained by DTED. . 20 families living in rental units had their units rehabbed totaling $164,611.77** put into maintaining affordable rental units. Another rental unit will be created with an additional $7500 that we will be closing on in a few weeks. . 7 commercial properties were rehabbed, 2 with over $50,000 of rehab dollars put into their properties (half from Small Cities) totaling $91,459.98 in rehab to maintain the business district in downtown Shakopee. A new office space will be created as a result of this program that will be closing on their loan in the next few weeks. The exact dollar amount is not known at this time. UpdateJulO3.doc 2 8/1/2003 Single-Family Rehabilitation Project Recap on the program To be eligible for the program, the applicant's income must be below 80% of the area median income. The homeowner will be eligible for a 50 to 100% grant depending upon their income. The homeowner would need to provide leverage ranging from 0 to 50%. The HRA has low-interest loans the homeowner could apply for to use as their leverage requirement. However, if they are not eligible for a leverage source due to poor credit, too many debts, no equity, etc., the leverage requirement will be waived and they will receive a 100% Small Cities grant. The grant is a 0% interest, 10-year deferred loan. If the homeowner stays in the home for 10 years, they will not have to pay the loan back. The loan is forgiven on a pro-rated basis of 10% per year. For example, if the homeowner moves out 3 years later they would be responsible for paying back to the City 70% of what they borrowed. After their application has been approved, Dave Schaffer, the HRA's Rehab Advisor, will schedule an appointment to inspect the home to determine what improvements can be done. Dave will draw up a work write-up for the homeowner to submit to contractors. It is the responsibility of the homeowner to select the contractor(s). After reasonable bids have been attained, the homeowner will schedule a time to close on the loan with the HRA. The HRA will make the payments to the contractor(s) after the work has been inspected by Dave Schaffer. The HRA will then submit a draw request to the City (to submit to DTED) for reimbursement. Single-Family Rehab Summary 30 applicants have closed on their loans and work is under way. 22 of those applicants have had all of their work completed. Commercial funding was transferred to assist the 4 additional applicants. Amount Funded $369,000.00 Amount Committed $433.622.03 (closed on their loans) Balance Remaining $ -64,622.03 Transfer from + Commercial Program $64,622.03 Balance after transfer = $0.00 UpdateJul03.doc 3 8/1/2003 Applicants that have closed This applicant had considered turning his property into a duplex and had applied for rental rehab funds, he decided to keep his property as his home and thus used single- family funding. HRA Loan Number: 57-03-31 Household Composition: 1 single male Loan Amount: $19,000.00 Gross Income: $13,000 Oust began selling real estate.) Improvements: new sidings, doors & windows Market Value of the Property: $155,700 Rental Rehabilitation Project Recap on the program Any rental owner may apply for the program as long as their property is located in the targeted Small Cities Boundary. 51 % of their rental units need to be leased by tenants at or below 80% of Metro Area Median Income, and the rents for all of the units would need to be at or below the Fair Market Rents. If the property is in the targeted area, and both the tenant's income and rent are within the allowable limits a property owner would be eligible for a deferred loan up to $7,500 per unit. A maximum loan amount is currently under advisement with city staff. The owner is required to match these dollars with a 50% match. This is a secured loan, which will be forgiven after seven years. Compliance of rent restriction and tenant characteristics is in force for the full seven years. The loan is forgiven on a pro-rated basis of 14.28% per year. After their application has been approved, Bill Schwanke, the HRA's Rehab Advisor, will schedule an appointment to inspect the rental property to determine what improvements UpdateJul03.doc 4 8/1/2003 should be incorporated into the scope of work. Bill will draw up a work write-up for the homeowner to submit to contractors. It is the responsibility of the homeowner to select the contractor(s). After reasonable bids have been attained, the property owner will schedule a time to close on the loan with the HRA. The HRA will make the necessary payments to the contractor(s), after Bill Schwanke has inspected the work. The HRA will then submit a draw request to the City (to submit to DTED) for reimbursement Rental Rehab Summary 7 property owners received funding from the rental rehab program with a total of 20 rental units being rehabbed. Unfortunately, one of the rental properties with 3 units currently being rehabbed and was recently devastated by fire. We will be reimbursing him for Small Cities work that was completed prior to the fire, but he has chosen to not rebuild. If the client would have chosen to rebuild the property his remaining rental loan funds could have be used towards the reconstruction. We currently have an applicant that will be utilizing both commercial and $7500 in rental funds (for one rental unit), we anticipate both loans to be closed by August 8th, 2003. Work has begun and he will be paying for the work that has already begun from his 50% match of funds. No Small Cities funded work can begin prior to loan closing. Amount Funded $121,500.00 Amount Committed $172,111 .77 ** **Will be modified due to the fire Balance Remaining $-50,611.77 Transfer from Commercial Program $50,611.77 Balance after transfer $0.00 Commercial Rehabilitation Project Recap on the Program Any commercial property owner may apply for the program as long as their property is located in the targeted Small Cities Boundary. Note: this boundary is the small area located in the core downtown area of the bigger Small Cities targeted area. Priority is given to owner occupied structures or where leases are currently in place. Building improvements must be directed toward correcting defects or deficiencies in the property affecting the aesthetics or the property safety, energy consumption, structural/mechanical systems, habitability or handicapped accessibility of the property. UpdateJ ul03 .doc 5 8/1/2003 Owners are eligible for 50% of the total commercial repair costs, with a maximum loan up to $25,000. The loan is a deferred loan for seven years; which is pro-rated in case of sale. Commercial Rehab Summary A total of 7 commercial property owners received commercial funding. With the 50% match requirement, roughly $200,000 of rehabilitation was completed with the commercial program. The applicant who is using both commercial and rental funds will be modifying the existing single-family home (zoned commercial) to include a small office space on the first floor. Currently the final dollar amount is unavailable, but will be provided prior to final approval and the loan closing. Amount Funded $251,250.00 Amount Allocated Unknown to date Amount Committed $91,459.98 (closed on their loans) Balance Remaining $159,790.02 Transfer to Rental $-50,611.77 Transfer to Single Family .$-64,622.03 Balance after transfer $ 44,556.22 UpdateJul03.doc 6 8/1/2003