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Home My WebLink About7. Small Cities Development Program Update #7 CITY OF SHAKOPEE Memorandum TO: Economic Development Authority Mark McNeill, EDA Executive Director Economic Development Advisory Committee FROM: Paul Snook, Economic Development coordina~ SUBJECT: Small Cities Development Program (SCDP) Update DATE: May 30, 2003 Enclosed is the May 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 Propertv or Unit Single Family Residential (goal: 30 units) $369,000 $415,116 112% $46,116 $19,000 + $46.1 16 (transfer from comc1) $0 Rental Residential (goal: 30 units) $121,500 $164,612 135% $-43,112 $10,000 +43.1 12 (transfer from comc1) 0 Commercial (goal: 15 units) $251,250 $91,460 36% $159,790 $25,000 - $ 46,116 (t'fer to s-fam) $ 43,112 (t'fer to rental) $ 70,562 TOTAL $741,750 $671,188 90% $70,562 UpdateMay03.doc 1 5/30/2003 Small Cities Shakopee Rehab Program All but one additional single family applicant have closed on their loans and work is underway. All rental and commercial applicants have closed on their loans. 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. Unfortunately, the commercial program didn't fare so well even after meeting with property owners one-on-one and several marketing attempts. However, with the 50% requirement and no other special loan programs to tap into for assistance for the 50% match, this program was a tougher sell. Both the rental rehab and single family rehab had attractive loan programs that the HRA could offer that required little or no interest, some are even forgivable, that applicants could tap into for their match. Furthermore, many of the commercial loan beneficiaries did not utilize the maximum loan amounts of $25,000. 2 applicants utilized the full $25,000, but the remaining applicants only utilized $3000, $7000, $12,000 and $17,000 respectfully. 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, 1 O-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 contra cto r( 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. UpdateMay03.doc 2 5/30/2003 Single-Family Rehab Summary 29 applicants have closed on their loans and work is under way. 22 of those applicants have had all of their work completed. There is currently one applicant from the original single family pool of funding who is still optioning bids and has yet to close on her loan. To date, $405,615.98 has been given to households. Commercial funding was transferred to assist the 3 additional applicants. Amount Funded $369,000.00 Amount Committed $405,615.98 (closed on their loans) Amount Allocated $ 9.500.00 (has been approved, closing June 5th) Balance Remaining $ -46,115.98 Transfer from + Commercial Program $46,115.98 Balance after transfer = $0.00 Applicants that have closed 3 of the 4 remaining single family applicants have closed on their loans. The final applicant will be closing on her loan June 5th. HRA Loan Number: 57-02-27 Household Composition: 1 single male Loan Amount: $19,000 Gross Income: $8750 Improvements: Windows, doors, siding, and roof Market Value of the Property: 120,000 HRA Loan Number: 57-03-29 Household Composition: 2 adults 3 children Loan Amount: $19,000 Gross Income: $35,233 Improvements: window/doors, siding, plumbing, and electrical work UpdateMay03.doc 3 5/30/2003 I Market Value of the Property: I HRA Loan Number: 57-02-30 Household Composition: 1 single female Loan Amount: $18,930 Gross Income: $16,618 Improvements: kitchen cabinets, furnace, flooring, and bathroom improvements (plumbing) Market Value of the Property: 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 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 UpdateMay03.doc 4 5/30/2003 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. If the client chooses to rebuild the property his remaining rental loan funds can be used towards the rehab. We are currently waiting to hear back from the client on how he wishes to proceed. Otherwise, all of the rental applicants have closed on their loans. Amount Funded $121,500.00 Amount Committed $164,611.77 (closed on their loans) Balance Remaining $-43,111.77 Transfer from Commercial Program $43 ,111 .77 Balance after transfer $0.00 Applicants that have closed HRA Loan Number: 57R-02-12 Loan Amount: $7500 Number of Rental Units: One Monthly Rent: Tenant voluntarily vacated the property March 2003 Waiting to lease up until after rehabilitation Improvements: new bathroom and kitchen Market Value of the Property: $100,600 HRA Loan Number: 57R-02-11 Loan Amount: $22,269.12 *** Number of Rental Units: Three Monthly Rent: *** This property was devastated by fire. The owner may choose not to proceed with the full loan amount. Improvements: Market Value of the Property: UpdateMay03.doc 5 5/30/2003 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. 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. Amount Funded $251,250.00 Amount Committed $91.459.98 (closed on their loans) Balance Remaining $159,790.02 Transfer to Rental $-43,111.77 Transfer to Single Family $-46.115.98 Balance after transfer $ 70,562.27 (will be given back to DTED end of Sept. ) Applicants that have closed HRA Loan Number: Loan Amount: ALL OF THE COMMERCIAL APPLICANTS HA VE CLOSED ON THEIR LOANS Gross Income: UpdateMay03.doc 6 5/30/2003