INFORMATION HRSR 05-03-2010 - Laserfiche WebLink

Home Browse Search

F'' ~~ ., Alright, raise your hand if you have heard of a "housing improvement area"? Not too many hands in the air. The housing improvement area (HIA) may be one of the most overlooked tools available to Minnesota cities. The HIA allows cities to partner with residents and homeowners' associations to undertake critical reinvestment in buildings and infrastructure. With the boom in townhome construction during the past decade and with a large supply of 20 and 30 year old condominiums, the n i I use of this tool will grow. This article explains the function and application of housing improvement areas. The Need Before examining the HIA, let's consider the need. The single-family (detached) house and the apartment building are owned by a single party. This single party owns the entire building and site and is solely responsible for its maintenance. Residents of townhomes and condominiums face some unique challenges in undertaking property maintenance. The interior of the housing unit is owned by the individual homeowner. The shell of each building and all infrastructure are common property, owned jointly by all homeowners. The maintenance and revitalization of the common property is the shared responsibility of the homeowner's association, guided by a board of directors. Association members pay monthly dues to fund current and long- term maintenance. With proper planning and financial management, an association accumulates reserves needed to undertake major capital replacement projects. Problems arise when an association fails to plan for the future. Associations may find themselves financially handcuffed. Bylaws typically set limits on a board's ability to increase dues or levy special assessments without approval of homeowners, often with thresholds exceeding simple majority. These are the only revenues available to an association. Even with homeowner support to raise revenue, an underfunded association may not be able to catch up. Acceptable annual revenues may not provide the resources needed to undertake capital improvements. The lack of capital reserves may lead to a continuing downward spiral of deteriorating physical condition of the housing. Over time, the lack of investment leads to the loss of value for owners and taxing jurisdictions and the diminished ability to sell units. The HIA is a means for cities, homeowners' associations and property owners to create a collaborative solution. In simplest terms, a housing improvement area is a special taxing district used to make improvements in areas of owner-occupied housing. To pay for these improvements, a city may levy "fees" and issue bonds. It is not possible to describe all of the details and nuances of housing improvement areas in the confines of this article. The following sections highlight the basic elements of the HIA. Enabling Actions An ord finance defines the boundaries ofthe area and the improvements that can be undertaken. The HIA Statute does not define (or limit) the improvements that can be made through a HIA. Any improvement to the common property of association can be done through a HIA. Potential uses include rehabilitation of streets, garages, roofs, windows and HVAC. A resolution sets the parameters of the fee. The fee is the mechanism for collecting revenues from property in the improvement area. The resolution defines the term of the fee and how it is allocated to properties. A fee may function like a property tax, distributed on the basis of tax capacity value of property in the area. Other allocation methods include equal amount by housing unit and pro-rata share of ownership interest. A city may also assess housing improvements to benefitted property within an area. The resolution also sets the means of collecting revenues. HIA fees may be collected through the property tax system or through other means provided by the City. Process Use of these powers is subject to unique procedures. A city council has the power to initiate use of most municipal finance tools. The procedures to establish the area and to levy the fee must begin with a petition of property owners. Owners of 25% or more of the housing units that would be subject to the fee must petition the city to hold a public hearing on the area and on the proposed fee. City actions to adopt the area ordinance and the fee resolution are also subject to veto by property owners. Residents of 35% or more of the housing units subject to the fee may file an objection to the ordinance and block its adoption. Adoption of the fee resolution is blocked if the owners of 35% or more of the housing units' tax capacity subject to the fee file an objection. Objections must be filed before the effective date of the ordinance or ~F~~M~~1~ ~' -~ 'ai~ ii ;~~,td it ~, y~ iiis~! the auT~~~ tt; _sal=li~h housin;~ in~_~~~_ .~r~2"t ~u~~_is ~,r HI'. -~ e '~~unc i" C:'irr _~.,t~. ~t,;~it.~s s~~~t~cris -- 1l r~ 4'~' ~1 (tne HI;, _;<rtuh~,) i ~'~e FII:; Stat..t; ~ <~r~ c. r~er~'I~,r ~, >Ch.eC:LIIP.~1to-Jf~;cYun!u^t~0 <<~]- the resolution. The effective date cannot be less than 45 days after adoption by the city council. Bonds The HIA Statute authorizes the issuance of bonds to finance authorized housing improvements. These bonds may be general obligations of the City. General obligation housing improvement area bonds do not require an election and are not subject to the debt limit. The bonds are payable primarily out of the proceeds of the fees or from any other special assessments or revenues available to be pledged for their payment under charter or statutory authority, or from two or more of those sources. The bonds cannot be issued until after a contract for the construction of all or part of the improvements has been entered into or the work has been ordered. Jurisdiction A city is the only political subdivision authorized to establish housing improvement areas. Once the area is established, the city may assign implementation powers and responsibilities to another entity. An economic development authority, housing and redevelopment authority or other entity authorized by law to exercise their powers may be designated in the enabling ordinance as responsible for implementing and administering the housing improvement area. This action conveys the powers to make and finance improvements in the HIA. Tips Past experience with the use of housing improvement areas offers several suggestions on making use of this authority. CityJssociaion Relationship. In a perfact world, cities would not need to establish housing improvement areas. Homeowners' associations would adequately finance the maintenance of common ownership elements. A proactive role in building relationships with associations may reduce the need for HIA. Continued on Page 4 r~~.