VII.1. Resolution Establishing Legislative Policy 7-I Housing Improvement Area Policy; Needham
CITY OF HOPKINS
City Council Report 2024-114
To: Honorable Mayor and Council Members
Mike Mornson, City Manager
From: Revée Needham, Community Development Manager
Date: September 18, 2024
Subject: Resolution Establishing Housing Improvement Area Policy in the
Legislative Policy Manual
_____________________________________________________________________
RECOMMENDED ACTION
MOTION TO adopt Resolution 2024-058 Establishing Legislative Policy 7-I – Housing
Improvement Area Policy.
OVERVIEW
The Legislative Policy Manual provides uniform guidelines on City policies so that
actions that are taken are consistent and fair. A full copy of the Legislative Policy
Manual is available at https://www.hopkinsmn.com/350/City-Document-Archives.
In 1994, the City received special legislation to establish a Housing Improvement Area
(HIA) for Westbrooke Patio Homes (now known as Cranberry Pointe). In 1996, HIAs
were established in State Statute, and subsequently the City adopted an HIA policy in
1997. This policy was not placed within the Legislative Policy Manual at the time. The
1997 policy is attached for reference. The proposed HIA policy has been updated to
reflect current State Statute and best practices and will be located within the legislative
policy manual. City staff have received an inquiry from a local association about
potential interest in establishing a Housing Improvement Area.
Housing Improvement Areas
Minnesota State Statute 428A.11-428A.20 grants the authority to create HIAs to cities.
A Housing Improvement Area (HIA) is a financial tool for improvements in
condominiums and townhomes. HIAs are city-funded loans that enable condominium
and townhome associations to complete needed improvements to common areas of
their development that they are otherwise unable to finance.
The enabling law provides that improvements are to be made to the common elements
of housing structures. Common elements are generally those maintenance and capital
improvement items which are the responsibility of the association and not the individual
homeowners such as windows, siding, roofing and parking lot resurfacing. Ideally, the
association reserves money from association dues to make needed improvements. In
reality, associations often fail to reserve adequate funds due to a number of factors
including limitations in annual dues increases set by the association bylaws, failure to
complete an accurate needs assessment and/or lack of an adequate corresponding
budget. A one-time assessment to pay for major improvements is also problematic in
Planning & Economic
Development
that the escalating cost of repairs often puts a project out of reach for most
homeowners and an assessment is often unaffordable if not allowed to be financed
over time.
It can also be more difficult for townhome and condominium under shared ownership to
obtain private financing for improvements, due to insufficient collateral as common
areas have no real value that can be liened as security. Failure to obtain financing for
needed improvements can result in entire developments being restricted from obtaining
new mortgage lending, greatly impacting current owners’ ability to sell and decreasing
property values.
Through an HIA, the City acts as the financing source, typically through general
obligation bonds, for the improvements, which are then paid back over the term of the
HIA through a fee that acts similar to a special assessment. It is important to note that
bonding for HIAs does not impact the City’s bond rating.
An HIA is only appropriate for necessary improvements and the association must
provide proof of denial of other financing options and a report detailing the property’s
condition. They must also engage with their membership, educate them on the repairs
that are needed and facilitate a petition process that has a majority of owners
requesting the establishment of a HIA by the City. The HIA process can be terminated if
45% of the owners file a petition opposing the creation.
Other cities in the Metropolitan region have HIA policies such as St Louis Park, Edina,
Minneapolis, West St Paul, Oakdale, Eagan, Burnsville, etc.
The City of Hopkins has completed four HIAs in the past: Westbrooke Patio Homes
(two HIAs), Valley Park, and Meadowcreek. The City was the first municipality in the
state to receive special legislation to create an HIA for Westbrooke Patio Homes in
1994, which is now known as Cranberry Pointe. The City did not experience any
collection issues with the HIAs, and they have now all been decertified.
HIA Policy
The full proposed HIA policy is attached, which incorporates language from other cities’
HIA policies and includes recommended changes from the City attorneys. The policy
would be used to review any received HIA applications and does not automatically
approve an HIA.
The policy includes:
General purpose and goals
o To promote neighborhood stabilization and revitalization
o To correct housing or building code violations
o Maintain integrity of existing residential housing
o Preserve naturally occurring affordable housing
General authority and requirements
o MN State Statute
o Acknowledge and establishes city authority to levy fees and/or
assessments as well as issue bonds
o City authority to review application
Eligible Improvements
o Limited to the common elements of the association’s property
Review Procedures
o Application requirements
Signed petition from 75% of owners in support of HIA
Third party reserve study
Thirty-year financial plan
o Required review by City financial advisor, City Attorney, and City staff
o HIA term is limited to 20 years
o Process
Initial review by City Council
Public Hearing(s)
Development Agreement
o Right to deny HIA funding
The policy includes the administration fee however, the application and escrow fees will
be added to the fee schedule at the November 12, 2024 City Council meeting.
SUPPORTING INFORMATION
• Resolution 2024-058
• Housing Improvement Area Policy
• 1997 Housing Improvement Area Policy
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 2024-058
ESTABLISHING LEGISLATIVE POLICY 7-I
HOUSING IMPROVEMENT AREA POLICY
WHEREAS, the City Council of the City of Hopkins has approved a document entitled
the Legislative Policy Manual to provide uniform guidelines on City policies so that
actions taken are consistent and fair; and;
WHEREAS, the City Council has created Legislative Policy 7-I in order to set forth the
procedures to be followed in creating a housing improvement area.
NOW THEREFORE BE IT RESOLVED, that the City Council of the City of Hopkins
hereby adopts the establishment of Legislative Policy 7-I Housing Improvement Area
Policy as proposed in Council Report 2024-114.
Adopted by the City Council of the City of Hopkins this 18th day of September, 2024.
By:___________________________
Patrick Hanlon, Mayor
ATTEST:
_______________________________
Amy Domeier, City Clerk
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POLICY 7-I
HOUSING IMPROVEMENT AREA POLICY
1. PURPOSE
1.01 The purpose of this policy is to establish the City’s position as it relates to the use
of Housing Improvement Area (HIA) financing for private housing improvements.
This policy shall be used as a guide in processing and reviewing applications
requesting HIA financing. Requests for the establishment of HIAs shall be
reviewed in accordance with state law and this policy.
1.02 The City shall have the option of amending or waiving sections of this policy
when determined necessary or appropriate.
2. AUTHORITY
2.01 The City of Hopkins has the authority to establish HIAs under Minnesota Statutes,
Section 428A.11 to 428.21, as amended. Such authority expires June 30, 2028,
unless extended by the legislature.
2.02 Within an HIA, the City has the authority to:
a) Make housing improvements
b) Levy fees and assessments, including interest
c) Issue bonds or use other funds to pay for housing improvements
2.03 The City Council has the authority to review each HIA petition, which includes
scope of improvements, association’s finances, long term financial plan, and
membership support.
3. ELIGIBLE USES OF HIA FINANCING
3.01 As a matter of adopted policy, the City of Hopkins will consider using HIA
financing to assist private property association members only when the proposed
privately owned housing improvement project will address one or more of the
following goals:
a) To promote neighborhood stabilization and revitalization, removing blight
and/or upgrading the existing housing stock in a neighborhood.
b) To correct housing or building code violations and address health and safety
violations as identified by the City Building Official and code enforcement
staff.
c) To maintain or obtain Federal Housing Authority (FHA) mortgage eligibility
for a particular condominium or townhome association home within the
designated HIA.
d) To increase or prevent the loss of the tax base of the City to ensure the City has
a long-term ability to provide adequate services for its residents.
e) To preserve or increase valuation and provide for the long-term maintenance of
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the property.
f) To preserve naturally occurring affordable housing.
g) To stabilize or increase the owner-occupancy level within a neighborhood or
association.
h) To meet other goals of stated public policy, as adopted by the City of Hopkins
from time to time, including promotion of quality urban design, quality
architectural design, energy conservation, decreasing the capital and operating
costs of local government, and other related policy goals.
4. HIA APPROVAL CRITERIA
4.01 In order to be eligible for HIA financing through the City, the association must
submit a housing improvement project application along with all required fees as
set by the Council and must follow the HIA review process set forth in this Policy.
All HIA loans financed through the City of Hopkins must meet the following
minimum approval criteria. A proposed housing improvement project that meets
these criteria is not automatically approved. Meeting these criteria creates no
contractual rights on the part of the City or any association.
4.02 The project must be in accordance with the Comprehensive Plan and Zoning
Ordinances, or required changes to the Plan and Ordinances must be under active
consideration by the City at the time of approval.
4.03 The HIA financing shall be provided within applicable state legislative
restrictions, debt limit guidelines, and other City financial requirements and
policies.
4.04 The project must meet one or more of the above adopted HIA Goals of the City of
Hopkins as noted in Section 4.
4.05 The association shall designate an administrator to be the City’s point of contact
throughout the process for HIA financing.
4.06 The term of the HIA should be the shortest term possible while still making the
annual fee affordable to the association members. The term of the bonds or other
debt incurred for the HIA should mature in 20 years or less. The City has the sole
discretion to determine the source(s) of financing, and sources other than issuing
bonds may be used.
4.07 Service charges, including, but not limited to, construction/housing improvement
project costs, cost of issuance of bonds and other pertinent costs association with
the proposed housing improvement project, will be imposed on the association
members in the same ratio as common elements or other such uniform method as
proposed by the applicant.
4.08 The association applying for the HIA must provide adequate financial guarantees
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to ensure the repayment of the Housing Improvement Area financing and the
performance of the administrative requirements of the development agreement.
Financial guarantees may include, but are not limited to, the pledge of the
association's assets including reserves, operating funds and/or property.
4.09 All taxes, fees, assessments, and charges for shared or common areas must be
current.
4.10 The proposed housing improvement project, including the use of HIA financing,
must be supported, in writing, by at least seventy-five percent (75%) of the
association members. The association must include the results of a vote by a
minimum of 75% of association members with its HIA application along with the
petitions to create the area.
4.11 The minimum housing improvement project cost for the issuance of bonds is
$750,000.
4.12 The association must have a replacement reserve study (the “Reserve Study”)
prepared by an independent third party, with designation as a Community
Associations Institute (CAI) certified reserve specialist. The Reserve Study must
conform to CAI Reserve Study standards and Minnesota Statutes 515B.3-114
through 515B.3-1141. The components of the Reserve Study must include a thirty‐
year replacement reserve plan (the “Reserve Plan”), and the Reserve Study and
Reserve Plan must be submitted with the proposed housing improvement project
application and will be reviewed by the City’s financial advisor. The association
must also have an independent third party prepare a thirty‐year reserve plan (the
“HIA Reserve Plan”) with the components of the proposed project for housing
improvements removed from the Reserve Plan. The independent third party must
also prepare a thirty‐year financial plan (the “Financial Plan”) that reflects the
annual replacement reserve contributions based on the HIA Reserve Plan. The
Financial Plan will provide a plan for the association’s operating budget with cost
increases over time to finance maintenance and operation of the common elements
within the association and a long-range plan to conduct and finance capital
improvements therein, that does not rely upon the subsequent use of the HIA tool.
The HIA Reserve Plan and the Financial Plan must be submitted with the proposed
housing improvement project application and will be reviewed by the City’s
financial advisor.
4.13 HIA financial assistance is last resort financing and will not be provided to
proposed housing improvement projects that have the financial stability to proceed
without the benefit of HIA financing. Evidence that the association has sought
other financing for the project must be provided at the time of application and
should include an explanation and verification that an assessment is not feasible,
along with rejection letters from at least two private lenders or other evidence
indicating a lack of financing options.
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4.14 The average market value of units in the association should not exceed 80% of the
Area Median Income as set by the U.S. Department of Housing and Urban
Development.
4.15 The association shall obtain temporary construction financing from a private
lender, and the City shall provide a take-out commitment to the lender, detailing
the terms of payoff of the construction financing. Upon project approval and
issuance of a certificate of completion, the City will issue bonds or notes to satisfy
the temporary construction loan.
4.16 The association must enter into a development agreement, prepared by the City,
which may include, but is not limited to, the following terms:
a) Establishment of a reserve fund
b) Staffing requirements
c) Annual reporting and financial auditing requirements, including regular updates to
the financial plan not less than once every five years
d) Conditions of disbursement
e) Limitations on prepayment of fees, if any
f) Required dues increases
g) Notification to all new owners of levied fees, including to individuals that purchase
property after the initial project
h) Requirement of multiple bids for proposed housing improvement project
construction
i) Assessments, including interest and City fees
4.17 The improvements financed through the HIA should be exterior improvements
and, in the case of a homeowner's association, the improvements should be
restricted to Limited Common Elements defined within the association’s
governing documents. The improvements must be of a permanent nature. The
association must have a third party conduct a facility needs assessment to
determine and prioritize the scope of improvements.
4.18 HIA financing should not be provided to projects that are not in the public interest,
as determined by the Council, including: poor project quality; projects that do not
comply with the Comprehensive Plan, zoning, or redevelopment plans, and City
policies; projects that provide no significant improvement to the neighborhood
and/or the City; and projects that do not provide a significant increase in the tax
base and/or prevent the loss of tax base.
4.19 The financial structure of the project must receive a favorable review by the City's
Finance Director and Financial Advisor. Legal components will be reviewed by
the City’s legal counsel. If applicable, the review will include an analysis of
performance and level of outstanding debt related to any previously approved
HIAs.
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4.20 If bonds are to be issued, legal components will be reviewed by the City bond
counsel.
4.21 All rental units within the HIA must be licensed according to City ordinance.
4.22 The City will charge an administrative fee of 1% of the total project amount or
$7,500, whichever is greater. The Association is responsible for all City out of
pocket expenses. This amount can be financed with the project costs. Any unused
portion of the escrow shall be refundable to the Association.
4.23 The City reserves the right to deny funding for specific improvements if they are
determined to not be in keeping with the intent of the policy.
1. PURPOSE
CITY OF HOPKINS
HOUSING IMPROVEMENT AREA POLICY
1.01 The purpose of this policy is to establish the City's position as relates to the use of
Housing Improvement Area financing for private housing improvements. This policy shall
be used as a guide in processing and reviewing applications requesting Housing
Improvement Area financing.
1.02 The City shall have the option of amending or waiving sections of this policy when
determined necessary or appropriate.
2. AUTHORITY
2.01 The City of Hopkins has the authority to establish housing improvement areas under 1994
Minnesota Laws, Chapter 587, Article 9, Section 22 through 31.
2.02 Within a housing improvement area, the City has the authority to:
A. Make housing improvements
B. Levy fees and assessments
C. Issue bonds to pay for improvements
3. ELIGIBLE USES OF HOUSING IMPROVEMENT AREA FINANCING
3.01 As a matter of adopted policy, the City of Hopkins will consider using Housing
Improvement Area financing to assist private property owners only in those circumstances
in which the proposed private projects address one or more of the following goals:
A. To promote neighborhood stabilization and revitalization by the removal of blight and/
the upgrading of the existing housing stock in a neighborhood.
B. To correct housing or building code violations as identified by the City Building
Official.
C. To maintain or obtain FHA mortgage eligibility for a particular condominium or
townhome association or single family home within the designated Housing Improvement
Area.
D. To increase or prevent the loss of the tax base of the City in order to ensure the
long -term ability of the City to provide adequate services for its residents.
E. To increase the owner - occupancy level within a neighborhood or association.
F. To meet other uses of public policy, as adopted by the City of Hopkins from time to
time, including promotion of quality urban design, quality architectural design, energy
conservation, decreasing the capital and operating costs of local government, etc.
4. HOUSING IMPROVEMENT AREA APPROVAL CRITERIA
4.01 All HIA financed through the City of Hopkins should meet the following minimum
approval criteria. However, it should not be presumed that a project meeting these criteria
will automatically be approved. Meeting these criteria creates no contractual rights on the
part of any association.
A. The project must be in accord with the Comprehensive Plan and Zoning Ordinances, or
required changes to the Plan and Ordinances must be under active consideration by the
City at the time of approval.
B. The HIA financing shall be provided within applicable state legislative restrictions, debt
limit guidelines, and other appropriate financial requirements and policies.
C. The project should meet one or more of the above adopted Housing Improvement Area
Goals of the City of Hopkins.
D. The term of the Housing Improvement Area should be the shortest term possible while
still making the annual fee affordable to the association members. The term of the bonds
for the area should mature in 20 years or less.
E. The membership should provide adequate financial guarantees to ensure the repayment
of the Housing Improvement Area financing and the performance of the administrative
requirements of the development agreement. Financial guarantees may include, but are
not limited to the pledge of the association's assets including reserves, operating funds
and /or property.
F. The proposed project, including the use of Housing Improvement Area financing,
should be supported by a majority of the owners within the association. The
association should include the results of a membership vote along with the petitions to
create the area.
G. The Association must have adopted a financial plan that provides for the Association to
finance maintenance and operation of the common elements within the Association and a
long -range plan to conduct and finance capital improvements therein.
H. Housing Improvement Area financial assistance should not be provided to projects that
have the financial feasibility to proceed without the benefit of Housing Improvement Area
financing. Evidence that the association has sought other financing for the project should
be provided. Evidence could include letters from private lenders, the results of an
association vote on an assessment or other evidence indicating a lack of other financing
options.
I. The homeowner's association must be willing to enter into a development agreement
which may include, but is not limited to, the following terms:
o establishment of a reserve fund
o staffing requirements
o annual reporting requirements
o conditions of disbursement
o required dues increases
J. The improvements financed through the HIA should be exterior improvements and in
the case of a homeowner's association, the improvements should be restricted to common
areas. The improvements must be of a permanent nature.
K HIA financing should not be provided to those projects that fail to meet good public
policy criteria as determined by the Council, including: poor project quality; projects that
are not in accord with the Comprehensive Plan, zoning, redevelopment plans, and City
policies; projects that provide no significant improvement to the neighborhood and /or the
City; and projects that do not provide a significant increase in the tax base and/or
prevent the loss of tax base.
L. The financial structure of the project should receive a favorable review by the City's
Financial Advisor and Bond Counsel. The review will include a review of performance
and level of outstanding debt of previous Housing Improvement Areas.
Adopted by the City of Hopkins on the day of , 1997.
APPLICATION PROCEDURES FOR ESTABLISHING A
HOUSING IMPROVEMENT AREA
1. Meet with appropriate City staff to discuss the scope of the project, member
participation, time schedule and other information as may be necessary.
2 Complete Preliminary Application for the Establishment of a Housing
Improvement Area. This form should be submitted to the Housing Coordinator
along with the other required documents and a fee payment of $100.
3. The request shall be reviewed by City staff on a preliminary basis as to the
feasibility of the project.
4. Staff will prepare a report for the City Council and the applicant which will include
a financial and legal analysis of the project.
5. The association must then submit the required petitions (minimum of 25% of
owners must sign petition form). At the time the petitions are received, the City
must have the final Association Financial Plan which identifies how both
maintenance and operation of the common elements will be paid for and a
long -range plan to conduct and finance capital improvements.
6. Upon receipt of an adequate number of valid petitions, the City will
have prepared the Plan for the Housing Improvement Area and the proposed
Development Agreement.
7. City will schedule public hearings on the creation of the district and the setting of
the fees (two separate public hearings required).
8. City Council will approve or deny the creation of the Housing Improvement Area
and the associated fees. If approved, the Development Agreement will be
executed, subject to the successful passage of the veto period. (If
35% or more of the owners file a written objection within the veto period, the City
cannot provide financing through a Housing Improvement Area).
9. It is understood that City Staff or City Council may from time to time determine
that a different process than that which is outlined is more appropriate, given the
circumstances of each individual request.
CITY OF HOPKINS
PRELIMINARY APPLICATION
HOUSING IMPROVEMENT AREA FINANCING
Legal Name of Association:
Mailing Address:
Name of Contact Person: Phone:
Name of Management Firm/Agent (if different than contact person)
Phone:
Legal Description of the Project Site:
REQUESTED INFORMATION
Addendum shall be attached hereto addressing in detail the following:
1. Give a general description of the project.
1. Explain how the project will meet the goals of the City Council as identified in Section
3.01 of the City of Hopkins Housing Improvement Area Policy.
2. Provide a proposed timeline for the project including the dates of membership meetings
to discuss project, submittal of required petitions, public hearings, construction start,
submission of first draw request and project completion .
3. List of improvements and estimated project budget.
4. Explain why Housing Improvement Area financing is necessary to undertake the
project. Attach any documentation regarding efforts to secure private financing.
5. Explain the process used to determine the scope of the proposed project and the desire
for HIA financing among the association members. Provide any documentation regarding
owner meetings discussing project.
Attach a copy of the following:
Association Bylaws
Audited financial statements for last two years
Association Financial Plan which identifies how both maintenance and operation of
the common elements will be paid for and a long -range plan to conduct and finance
capital improvements.
What is the proposed term of the Housing Improvement Area? Years
How do you proposed the fee be charged to the affected property owners?
equally among all properties
Other - for example based on unit size, percent interest in association or value
Please identify:
Amount of bond issue anticipated: $
Are there any properties within the Housing Improvement Area which should be exempt from the
fee? no yes, explain:
REQUIREMENTS FOR HOUSING IMPROVEMENT AREA (HIA) BOND FINANCING
To apply for HIA financing, the owners within the association must agree to the
following:
1. Must use City's choice of Bond Counsel and Financial Advisor(s).
2. Disbursements of bond proceeds must be made through an escrow agent to be selected
by the City of Hopkins.
3. You must pay an administrative fee to the City of one half percent of the bond issue or
flat fee of $10,000 which ever is greater.
4. City staff or it's agents will review the performance and level of outstanding debt of
previous Housing Improvement Areas before recommending the approval of additional
HIA debt.
5. The bond(s) shall be for an issue not less than $250,000.
By signing this application I hereby agree to the following:
1. I have read and will abide by all the requirements of the City for taxable bond financing.
I will also commit all contractors, subcontractors and any other major contributors to the
project to all segments applicable to them.
2. The above information is true and correct.
3. The Association will pay all costs involved in the legal and fiscal review of this project.
These costs include the Bond Counsel and City Attorney, and all costs involved in the
issuance of the bonds to finance the project.
4. I understand that the City reserves the right to deny final approval, regardless of
preliminary approval of the application.
Signature of Representative Date