CR 97-180 Application 4D Property Tax ClassificationOctober 1, 1997
Proposed Action
Overview
Primary Issues to Consider
Supporting Documents
o Resolution 97 -100
Re • o est fo pro*
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fI iAj4, A
Ker en Elverum, ousing Coordinator
APPLICATION FOR 4D PROPERTY TAX CLASSIFICATION
MONITORING AND INSPECTION SERVICES
Staff recommends approval of the following motion : Adopt resolution number 97 -100 authorizing
staff to submit an application to the Minnesota Housing Finance Agency (MHFA) to provide
monitoring and inspection services for the 4d property tax classification program.
With this motion, staff will prepare the application and submit it to MHFA.
The State Legislature has developed a new property tax classification called 4d. The new classification
replaces the low income rental property classes of 4c and 4d, and reduces these class rates from 2.0%
and 1.9% to 1.0 %. The rate change is effective for taxes payable in 1999.
The purpose of the new tax classification is to encourage rental property owners to make more housing
available to low income residents. To be eligible for the 4d tax classification, the owner must agree to
the following:
o Units must be occupied by individuals or families whose income is at or below 60% of the
median income of the area.
o Execute a rent restriction agreement. The agreement subjects the unit to a five -year rent
schedule that does not charge rents greater than 30% of 60% of the median area income.
o The unit must meet minimum housing standards.
o The owner must make 20% of the 4d units available to Section 8 recipients.
The Minnesota Housing Finance Agency is responsible for the overall administration of this program
but have issued a request for proposals for the monitoring and inspection services related to 4d. The
monitoring entity will receive $15 for each housing unit "pledged" under the 4d program. The
inspection fee will be negotiated between MHFA and the service provider. Applications are due to
MHFA by October 15, 1997. If selected, the City would be asked to sign a three -year contract.
o How will the monitoring and inspection services be administered?
o What are the benefits of administering the program?
Council Rpt #97 -180
4d Tax Classification
Council Rpt. 97 -180
Page 2
Analysis of the Issues
o How will the monitoring and inspection services be administered?
Monitoring Services
Each year the monitoring entity will be required to make a site visit at 25% of the developments which
have pledged units under the 4d classification. During the site visit, the monitor must determine overall
compliance with the 4d requirements and must complete a more detailed file review of 20% of the
pledged units within the development.
It is proposed that the monitoring services be administered by the Public Housing Manager and the
Housing Coordinator as their work schedule permits. These positions require similar monitoring
activities and as a result these staff members are experienced in providing these services. The City does
have the option of subcontracting the work if the time demands become too great. This may be the case
if a large number of condominium and single- family rental units apply for 4d status.
Inspection Services
The inspection services involve inspecting the 4d properties on a three year rotation. Because the
inspections required under the rental registration program will suffice for the purposes of class 4d, the
inspections will be combined and completed by the City's Housing Inspector. However, there will be
inspections required that would normally not be completed under the rental registration program, such
as condominium inspections. For these inspections, the owner would be charged an additional fee.
As with the monitoring services, if a significant number of condominium and single family properties
apply for the 4d status, it may be necessary to hire subcontractors or part-time inspectors to complete
all necessary inspections. The fees collected would cover this cost.
o What are the benefits of administering the program?
The benefits of providing the monitoring services are largely financial. While it is uncertain how many
units will be certified under the 4D classification, MHFA will pay the monitoring entity $15 per unit
pledged per year. If 50% of the rental properties participated the annual monitoring fee would be
approximately $41,000; with only 10% participation the fee would be $8,250. MHFA is reserving the
right to renegotiate this fee after one year.
There are several benefits of administering the inspection services including:
o combine rental registration inspections with 4D inspections avoiding duplication
o ability to enforce our housing maintenance code rather than having an outside agency enforce
our code
o additional revenue to support inspection program
4d Tax Classification
Council Rpt. 97 -180
Page 3
Due to very short notice of the request for proposals, staff has not been able to fully work through how
the inspections fees will be charged. However, if the details cannot be negotiated to the benefit of the
City, the Council would have the option of not entering into the contract with MFIFA.
Alternatives
The City Council has the following alternatives regarding this issue:
o Elect to submit an application for the 4D property tax classification monitoring and
inspection services.
o Elect to submit an application for only one of the services.
o Elect not to apply for the monitoring and inspection services. In this case, the services
will be provided in Hopkins by another entity.
ATTEST:
Terry Obermaier, City Clerk
CITY OF HOPKINS
Hennepin County, Minnesota
RESOLUTION NO. 97 -100
AUTHORIZING APPLICATION FOR THE 4D PROPERTY TAX CLASSIFICATION
MONITORING AND INSPECTION SERVICES
WHEREAS, the State Legislature has developed a new property tax classification known as 4d, and
WHEREAS, the Minnesota Housing Finance Agency is responsible for certifying eligible properties for
the 4d tax classification, and
WHEREAS, the Minnesota Housing Finance Agency has issued a request for proposals for the
monitoring and inspection services relating to the 4d classification, and
WHEREAS, the City of Hopkins believes that the City can best provide these services and is interested
in applying for the provision of monitoring and inspections services.
NOW THEREFORE BE IT RESOLVED, that the City Council of the City of Hopkins hereby
authorizes staff to prepare and submit an application to the Minnesota Housing Finance Agency to
provide monitoring and inspection services for the 4d property tax classification program.
Adopted by the City Council of the City of Hopkins this 7th day of October, 1997.
By
Charles D. Redepenning, Mayor
4d Property Tax Classification Monitoring and Inspection Services
The Minnesota Housing Finance Agency (MHFA) is pleased to announce that it is
accepting applications for the monitoring and /or inspection services related to the new
4d property tax rate created by the 1997 Legislature. The new class rate, which
effectively reduces the level of property taxes payable, was adopted by the Legislature
in May, 1997, and takes effect in January, 1998. The MHFA has been designated as
the responsible State Agency to create, review and monitor the process associated
with receiving the lower tax rate.
The purpose of this request for applications is to create a network of monitoring and
inspection entities to ensure the entire state has coverage and is able to receive the
new tax rate. These designated entities will be solely responsible for providing
monitoring and inspection services. Property owners will request the new tax rate by
application to MHFA in January and February of each year. Property owners will
submit an application fee equal to $25 /development and a monitoring fee equal to
$15 /pledged unit/year at the time of application. The monitoring entity will receive the
$15 /pledged unit/year directly from the MHFA once a year based on the number of
units applying for the new tax class rate. The inspection entity will create and collect
fees separately for inspection services.
The enclosed Description of Services will briefly describe the requirements of the
program and the monitor /inspector's responsibility. If your organization is interested in
providing monitoring and /or inspection services, please complete the enclosed
Application and return to the attention of John Ward at MHFA. Applicants will indicate
the area in which they would deliver the services. Priority will be given to those
monitoring and /or inspection entities efficiently serving the largest areas. In the case
of inspection services, entities currently enforcing rental housing maintenance
standards will be given priority. The inspection entity will have to include their fees
and justify those costs. This is a bidding process and, with all contracts, price and area
are negotiable. The application will be due at the MHFA office no later than 4:00 P.M.
on Wednesday, October 15, 1997, or postmarked by that same date.
If you have any questions, please call John Ward at (612) 296 -9802. We look forward
to hearing from you.
Enclosure
Monitoring Services:
Description of Services
4d Property Tax Classification
Monitoring and Inspection Services
Applicant must describe the proposed area to be served. MHFA may require the
monitoring entity take on additional areas if they are in the closest proximity to an area
that will not be served through the application process. Monitoring entities will be paid
$15 /pledged unit/year in their designated area. These funds are to be used to support
the expense of the monitoring. The monitoring entity may commit to providing the
service on their own or may commit to using subcontractors or any combination
thereof. If subcontractors are used, they must be identified in the application and their
qualifications must be included. Additionally, the response to the application must
include the proposed terms of the agreement with all subcontractors. The following is
a list of responsibilities to be carried out by the monitoring entity:
Determination of property eligibility in regard to rent, income, inspection, recording
and marketing requirements of units for Section 8.
Site inspections to review files. Reviews will take place on 25% of the properties
as chosen by MHFA in the monitoring entity's designated area each year. File
review will consist of 20% of the property's 4d files unless additional review is
needed based on initial 20% review.
Correspondence with owner and MHFA regarding completion of site visit and any
non - compliance issues.
Determination of inadvertent non- compliance compared to willful non - compliance.
Determine and recommend to MHFA where abatement of penalties and corrections
by owners are allowable.
Contract with MHFA will be required and will be in effect for three (3) years from the
date of the agreement or upon termination by MHFA.
Must have demonstrated experience in the monitoring of federal and /or state low
and moderate income multifamily housing programs.
Monitoring of developments currently under monitor's ownership /management is
prohibited.
Provide a breakdown of costs for providing services through the end of the first
year.
• Determine and recommend to MHFA where abatements of penalties and
corrections by owners are allowable.
Inspection Services:
Applicant must describe the proposed area to be served. MHFA may require the
inspection entity take on additional areas if they are in the closest proximity to an area
that will not be served through the application process. Inspection entities will certify in
the application what their expenses will be and will state the fees to be charged to an
owner. These funds are to be used exclusively to support the expense of the
inspection. The inspection entity may commit to providing the service on their own or
may commit to using subcontractors or any combination thereof. If subcontractors are
used, they must be identified in the application and their qualifications must be
included. Additionally, the response to the application must include the proposed
terms of the agreement with all subcontractors. The following is a list of
responsibilities to be carried out by the inspection entity:
Conduct on -site, physical inspections to determine the level of upkeep and
maintenance on the class 4d property and follow up as necessary.
• Inspectors must apply local rental housing maintenance standards, or where
absent, must apply Housing Quality Standards (HQS) of the Section 8 Program.
Inspections must be completed in a timely manner after request is made by an
owner.
Correspondence with owner and MHFA regarding completion of site visit and any
non - compliance issues.
• Contract with MHFA will be required and will be in effect for three (3) years from the
date of the agreement or upon termination by MHFA.
Must have demonstrated experience in the inspection of low and moderate income
multifamily housing.
Inspection of developments currently under inspector's ownership and /or
management is prohibited.
In certain cities, there is currently in place an inspection related to the licensing of
rental properties. This inspection will suffice for the purposes of class 4d. Additionally,
certain cities may not have a licensing criteria, but do have housing maintenance
standards. In those cases, local housing maintenance standards will apply. MHFA
intends to use local standards and inspectors where possible. In cases where no local
housing maintenance standards apply, the Section 8 Housing Quality Standards
(HQS) will be used.
The inspections already required for the tax credit and project based section 8
properties will suffice for the purposes of class 4d, provided, an inspection takes place
at least once every three years. MHFA first mortgage financed developments already
receive an annual inspection and do not need to be inspected for the purposes of
class 4d. The inspecting entity applying cannot claim fees for those properties
described above.
The applicant must have or be able to obtain authority to do business in the areas
being bid in the application. When an applicant is a local unit of government and is
proposing to provide services outside their service area, a resolution from the
governing authority of the area to be served is required.
The applicant can make application to be both the monitoring entity and the inspection
entity.
MINNESOTA 4D PROPERTY TAX CLASSIFICATION
HOUSING
FINANCE
AGENCY
I. APPLICANT (name of organization and addressl
11. APPLICANT INFORMATION
Clearly describe the geographical area in which you will provide service. (Example:
"All of Mower County except the City of Austin ").
III. COST OF SERVICES
Application for
Monitoring and Inspection Services
Applicants for inspection services are asked to submit to the Minnesota Housing
Finance Agency (MHFA), in outline form, the costs they will expect to charge property
owners to provide inspection services. Please use the space provided below.
Note: Applicants for monitoring services will be paid $15 /pledged
unit /year. Payment will be made directly by MHFA to monitoring entity
once a year based on the number of units requiring monitoring. MHFA
will ask monitors to maintain records of costs to be forwarded to MHFA at
year end.
4d Property Tax Classification 9/97
Application for Monitoring and Inspection Services 1
IV. MONITORING AND INSPECTION CAPABILITIES
A. Indicate your organization's direct experience in and involvement with
monitoring and inspection of multifamily housing in the last years:
(1) Section 8 Administration
(2) Title 11 Tax Monitoring
(3) Section 42, Tax Credit Monitoring
(4) Housing Quality Standards (HQS) Inspections
(5) Other Housing Maintenance Inspections
(6) No Prior Experience
(7) Other (explain)
B. List all staff who will be directly involved with the monitoring and /or inspections:
Responsibility Name Years Phone #
Exper
fence
General Administration
Monitoring Site Visits
and File Review
Physical Inspection
Licensing
Physical Inspection
Hsg. Maint. Standards
Physical Inspection
Hsg. Quality Standards
Other (specify)
4d Property Tax Classification 9/97
Application for Monitoring and Inspection Services 2
• V. SUBCONTRACTING:
Does your organization intend to subcontract any portion of the work?
Yes No
If your organization intends to subcontract any portion of the monitoring and /or
inspection services, submit with this application, copies of any subcontracts that your
agency will execute for the services related to the new 4d Property Tax Classification.
The subcontracts must include all terms and fees for services. All subcontractors must
be approved by MHFA prior to their execution.
Indicate below the entities with which your organization will subcontract, the tasks
these entities will perform and the geographic areas that will be covered by each
entity. Attach to the application the subcontractor's qualifications relating to services
provided to multifamily rental housing.
VI. CURRENT PROPERTY INVOLVEMENT
List, in the space below, the properties in which your entity has ownership and /or
management responsibilities. It is prohibited to provide services to those properties.
In such cases, MHFA will provide the monitoring and inspection services.
VII. AFFIRMATIVE ACTION
Property Name Address, City
Agencies other than units of local government must submit a copy of their Certificate of
Compliance or a notarized letter indicating that the local monitoring and /or inspecting
entity had no more than 20 full -time employees at any time within the previous 12
months.
4d Property Tax Classification
Application for Monitoring and Inspection S rvices 3
9/97
VIII. COUNTY BOARD /CITY COUNCIL /CORPORATE RESOLUTION (If
applicable)
Attach a Resolution Authorizing Application for participation with the monitoring and /or
inspection of the new 4d property tax classification. The Resolution must be executed
by the appropriate governing authority. If the resolution(s) is not available at the time
the application is submitted to MHFA, selection as a monitor and /or inspector may be
contingent on obtaining the resolution(s).
IX. SUBMISSION
This application is approved and submitted by:
Authorized Representative of Applying Title
Entity (print)
4d Property Tax Classification
Application for Monitoring and Inspection Services
Signature Date
NOTE: This application will be incorporated by reference as a contractual document. In this
respect it will be used as a basis for monitoring and evaluating performance. While
additional documentation may be attached, no alternative application forms will be accepted.
9/97