Housing & Redevelopment Authority - Regular Meeting

Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Bye. Thank you. so So,

No complaints here. All right. Calling the meeting of the St. Paul Housing Redevelopment Authority to order. Roll call, please.

Bowie? Coleman? Jones? Here. Kim? Nacher?

Here.

Yang? Here. Chair Johnson? Here. There are four present and three absent. Commissioners Bowie and Coleman are excused. Item number one for discussion is resolution 26-1008, reservation of funds for certain St. Paul projects applying for funding for the Minnesota Housing Finance Agency.

presentations both on these as well as informational staff reports that were presented at the last meeting uh just wanted to say thank you guys for all the work that has continued i've been following some of these projects over the course of many years i see several um folks and some developers of these projects as well so thank you for your consistency and going back to uh mhfa for additional funding i am We're hopeful that we will continue to see the investment in the city of St. Paul, especially surrounding some of our public housing projects and redevelopment projects here. It's very important to see the state investments. I was like, let me just keep talking until the microphone catches up. Wonderful.

We started from the beginning.

but yes just very very important when we have uh you know we've seen some of these projects come before us last year before that so seeing them and ensuring that their investments is um are persistent with our dollars being met so i'm very supportive of this uh reservation of funds and also supportive of the projects that will be seeking funding for it including those but not limited to those that are on the east side, but throughout the city. So I'll take a motion from Commissioner Naker to approve. Any further questions? All right, seeing none, all those in favor? Aye. All opposed?

Four in favor, zero opposed. The resolution is adopted. Item number two for discussion is resolution R.E.S. 26-1026, authorization to release the 4D affordable housing incentive program, covenant on 556 Gottzian Street, St. Paul, District 4, Ward 7.

Thank you, Kelly. I appreciate that. And also just a quick correction. This is a staff report, but also we'll take an action today because of the time sensitivity of it. But I do want to head it over to Director McMahon if there's anything you want to say in preface of the program. And folks kind of just will see why in the presentation.

Yeah, thank you, Chair, Commissioners. Happy to introduce Lucas Allen, and looking forward to his information and presentation on this. Thank you also for noting this is an action item before us today. It's a rental property that will be sold to become owner-occupied, income-restricted, owner-occupied, so the request and the covenant be released. It will no longer be a rental property, but Mr. Allen has more information, so thank you.

Thank you, chair, commissioners. Before you is the item as mentioned. So a little bit of an introduction about the 4D program. It is a program enabled by state law that calls for a property class tax reduction to help preserve affordable housing. And so once a unit becomes enrolled in the local 4D program, we take that to the state, which then takes that determination to the county for property assessments in the following years. In most cases, this amounts to an up to 80% reduction in a property tax for a fully enrolled 4D property, but it is prorated to a certain portion of units depending on how many are enrolled per site. So considering that applications are currently not open for the city's local 4D program, we're currently in more of a compliance process. And so how that looks is we send out compliance forms to landlords or property managers. They fill those out. And then after they do that, they return it to us. And then we look primarily for compliance with three things, the maximum rent limits, a 3% annual increase limit, and new household income limits. Once they are verified as compliant for all of the properties throughout that year, we send that list to the state. And then the state does that sort of process I had mentioned. Program participants only receive the benefit in proportion to their units. And then the state also has a sort of compliance process they run concurrently to ours. And then they cross-reference those lists and then send their final determinations to the county. Any sort of changes that happen to enrollment are largely on a compliant, non-compliant basis. We rarely remove individual properties from the program just simply because they can go into non-compliance and there aren't necessarily any detriments to that minus the losing of the 4D status, the intention of the program. So for this particular instance, 556 Godstein Street is a single unit restricted at 50% AMI and was enrolled into the city's 4D program in 2023. The home is currently within the purchasing process with an income-qualifying owner-occupier who is actually using DPA funds to help with the purchase of the home. And so the request is to release the restrictive covenant in a 556 godsend so that the sale may commence. This is essentially because there will be no more units left over that would be rentals after the sale is sold. And so the 4D restrictions sort of become moot at that point. And so this is helping them declare a clear title.

Any questions?

I don't see any right now. Well, actually, Commissioner Naker.

Just when you thought.

So I just want to make sure I understand. So properties can choose to not comply with the program, and then they lose the benefit. And then you said we usually don't allow them to unenroll because the new property owner could just choose not to comply. In this case... we're removing the declaration because we need to in order for it to sell. Can you just say a little bit more about why?

Yeah, Chair, Commissioner. So the reason in this instance is because it will be owner-occupied rather than a rental unit. And the 4D tax statute is only qualifying for rental units. And so by having a 4D statute tied to a property that is owner-occupied sort of complicates the process a little bit. And it also creates an unnecessary burden in the case of future sales to a future owner-occupier, because the declaration still calls for certain administrative processes whenever there is a sale, as well as compliance informing and things like that. So once the 4D program guidelines call for when there is a sale to an income-qualifying owner-occupier. It wasn't mentioned in the presentation, but the income qualification is 80% AMI. Once they meet that test, then the properties can be sold to those individuals, and then the declarations can be removed.

OK. So again, just so, I think this is important too. In this case, did we know about the sale?

I'm sorry.

Did you know about the CIL ahead of time?

Correct. Yeah, we have a link that they can fill out that informs us, and then we go through this process to bring it forward to the board.

What is the timeline for the closing?

The closing in this instance was previously scheduled, and it had to be moved in order to accommodate this meeting, hence some of the time sensitiveness that was communicated.

Prior to the sale, though, was that communication in place? So just from the timeliness of it all, I'm not aware that the HRA body knew in advance of the sale that this was going to take place further than being notified on the back end that it was going to happen. Is that accurate, Mr. Allen?

Yeah, so we were in, Chair, we were in communication with the various agents involved in the process, and then we're sort of, this was the first sale that in my tenure in this position that I had to bring forward to the board, and so it was sort of a learning process as to how exactly the process would pan out.

Director McMahon, could you speak a little bit to the process itself, the time-sensitive nature, like what happened in the back end? Because I think one of the things that is a little confusing for me is how we didn't. It doesn't seem like there was maybe the time frame of which you might have the discussions in time to kind of explain what the trade-off of this property I don't know to what extent that took place, just because we see it at the end. It's like, OK, here's a cell. It's going to happen. It's going to be owner-occupied. We have to remove the 4D requirement. But there clearly was multiple steps leading up to that. It's just hard to see.

Yeah, chair, commissioners. Part of the time sensitivity of this one is that I typically prefer to have a little more leeway on this one. We were notified of the sale of the property after closing had been scheduled. And so that closing date was then pushed back in order to have an HRA meeting. to have this action before it. But that's the reason for the consolidation of report and action in one meeting instead of two, as well as with the July 4th holiday, there being the first week off from HRA next week.

Commissioner Kim.

Question about the timing of this, but more specific to even potentially other scenarios we might find ourselves in. Is the reason because the title company pulled title and found the declarations? Is there a different process in which the city would be notified of that sale prior to a title company pulling title and seeing declarations on the property?

Chair, commissioners, and I'm actually going to rely on the experts in the room to help me out on this one as well. But typically, I mean, the owner's aware. And so the owner is being part of, in the 4D program, receiving the tax benefit. The expectation is should have the knowledge that that covenant is on there if they choose to sell to an owner-occupied individual. And so typically, they'd have that awareness to then know that covenant should be released to move forward. Anything you want to add?

No, chair commissioners, that's essentially how the process works is they inform us, hey, we're selling this property, and then we work on developing the documents and things, and then in specific instances where it's a declaration removal, we bring it before the board.

Okay, so it's fairly typical then for the owners to know that it is something that they've signed and that they need to notify the city, generally speaking? Yeah.

Yeah, Chair, Commissioners, I think part of it is because as being in the program, there is that annual compliance. So there is that annual sort of touch point with staff already and that communication that exists there. So that awareness of the program generally, I think a lot of it comes from the compliance and the reporting.

Okay, that sounds great. I appreciate it. My line of questioning is much more around, like, how do we avoid this from happening in the future? But it sounds like this is maybe not unique, but just not one that diverted from a normal process. Possibly.

I'm kind of listening to that saying, Mr. Allen, I guess my follow-up question for you is how often are you connecting with those in the 4D program? And what does the cadence and the process look like from the end piece of just, you know, typically when do you actually hear about a cell? And also then to what cadence are we kind of connecting? operating in a place to ensure that we don't just have a tax credit that's put in place that someone can just decide like tomorrow they're going to sell the property and have to tell us and then now we have several different several ones of these coming forward in the future like what is the what are the safeguards for us and what is the process looking in the back end right now

Yeah, I'll just add, chair and commissioners, that there aren't many sales. I mean, it's not every week things happening. There aren't tons of them. Often, if the property is a rental property and it's being sold, often it's being sold with the intent for it to remain as a rental property, in which case no HRA board action is needed. It's in the circumstance here that the use is going from a rental to an owner-occupied place that has the impact.

Commissioner Baker. Thanks, Chair. I appreciate the exploration of this, because I do think it helps us understand the program better. And the way it sounds to me is that the annual compliance check is the way we make sure that a program still qualifies to be in 4D. And that 4D is a benefit to the property owner, because it's a tax reduction. So I guess I'm not as worried about properties kind of falling through the cracks of this in the way that I sometimes am. If they fall through the cracks, that just means they don't get the benefits of the property tax reduction. I think this is a really interesting conversation, but as I'm thinking about it, it doesn't seem to carry the same risks. Worst comes to worst. They don't continue to get the benefit, and then we can assume they'll let us know if they want to receive it again.

Yeah, I think it's more so like what's stopping an order from receiving the benefit, right, and doing the sale, and then so they receive the benefit of being a 40 property, and then they sale within the same year, in the same time frame. so they wouldn't have qualified otherwise. But they qualify because they're a rental property, but now they're going to sell to be an owner property with lack of timing and lack of that communication that that was possibly their intent mid-year. I guess that's kind of where I'm coming from when it comes to just the annual review process itself. And then there's the annual reviews that possibly happened on this property. And then there's the reality of that mid-year. They're possibly benefiting from being a 40 property with the tax decrease and now selling to be an ownership opting out of the program with very little notice. That is kind of what I'm sharing with us. Less of them falling through the cracks, but more of just like... I hope that folks do have a clear understanding when they're in the program, just that the expectation would be that they kind of share with staff here about they're not necessarily they can't sell, but it's like the intent to sell, I think, could be communicated in a way that does not have us brushing on the back end to do something retroactively. But yeah, Commissioner Nader. Thank you.

No, thanks, Jo. That helps me understand the question. And I wonder, then my question to staff would maybe be, is there sort of any proration or back taxes paid? So I got the benefit of a lower tax rate because I have a 4D property. A month later, I sell. I understand this doesn't happen very often, but just trying to understand. And now it's no longer an affordable property. It's owned by the new owner. I know taxes are paid annually, so is that is there a whole year worth of 80% reduction then? Or is there some way of clawing back or realizing the benefit of the fact that now it shouldn't be in 4D anymore for the rest of the year? And maybe the same question could be asked if there's an annual compliance check for 4D, if at some point during the year the property stops being affordable for whatever reason, it wouldn't have to be a sale. How do we know that? And is there a way to realize the tax differential?

Chair, commissioners will say some of this more in the weeds details. I think we can follow up and provide as more information. Just noting that our role in it as a city is the once a year getting the compliance and sending that list to the state. It's a state tax benefit, a state program. And so I think maybe we'll want to connect with some of the state partners on some of the finer details of how they apply that tax benefit and some of those questions. Unless there's anything you want to add to it.

In terms of the former question that was asked regarding the continuation of the benefits, so it is for, like, if a site is compliant this year, 2026, that is reflective of property taxes 2027. And so in that case, then, I... would imagine that the county has some sort of process where in which their assessors are aware of a sale, transitions this unit, because they will be able to recognize that it is no longer a rental property, ergo ineligible for the IV-D classification because IV-D is only eligible for rental units.

It would be good to understand that better, though, especially now that it's an 80% tax reduction, not 40%. That's a significant reduction.

Chair, commissioners, we'll follow up with some of the details of implementation, essentially, if you will, of the tax benefit. Yeah.

I appreciate that, and I appreciate the dialogue. I think that's, I also was, you know, like, okay, let's wrap our head around that. But I think as it pertains to the actual item itself, it is in front of us to take that step today just to authorize the release. And I just want to make sure that folks don't have any other questions before we move it to a vote. Okay, seeing none, I will take a motion from Commissioner Naker to approve all those in favor.

Aye.

All opposed.

Six in favor, zero opposed. The resolution is adopted. Item number three is a public hearing. Resolution Public Hearing 26-145, resolution approving and authorizing the sale and conveyance of an HRA-owned parcel located at 1087 Ross Avenue. Authorization to enter into development agreement and authorization of expenditures for redevelopment, District 4, Ward 6.

All righty, this is a public hearing on this item for item number three. If you're here today to share any public comments on it, now would be your time. Seeing everyone rushing to the podium, no, I'm kidding. Seeing no one, I will take a motion from Commissioner Yang to close the public hearing and approve. Any questions? Seeing none, all those in favor?

Aye.

All opposed?

Six in favor, zero opposed. The public hearing is closed.

Resolution is adopted. As a reminder, we don't have a meeting next week. Our next meeting is July 8th. And then we will not have a meeting on the 15th. So then following that, our meeting after that will be on the 22nd. So there may be a couple items that come before you with introductions that have to act on the 22nd for the 8th meeting. And if there's anything that will come up there, you may see that within those two dates for July, we may do a couple introductions and actions if needed, just because we don't want to go the whole month without being able to do business. But otherwise, we are adjourned.