HRA seeks reduced city special assessments for housing development

At Tuesday night's regular Park Rapids City Council meeting, Headwaters Regional Development Commission Operations Director Mary Thompson explained to the council that the HRDC, on behalf of the Hubbard County Housing & Redevelopment Authority (HRA), is interested in developing housing for low and moderate-income families in Hubbard County.

"I'm actually an employee of the HRDC, but work under contract for the Hubbard County HRA. One of the benefits of that is that we have more of a regional approach, so we can find things that work really well in other communities and see if we can make those things work in Hubbard County as well," she said. "The project that we're proposing is a result of the work that we have done in other communities. We have done this new construction for moderate or workforce housing families for some time and we've been successful in doing that both in Blackduck and Baudette. We think that this model can be successful here in Park Rapids as well."

They have identified 11 lots in Hocking's Acres which had been forfeited for non-payment of taxes and special assessments. The unpaid assessments on each of the lots were for previous infrastructure improvements.

At the request of Hubbard County, the HRA began drafting a plan to take the tax-forfeited parcels, located within city limits, and develop single, family, owner-occupied homes.

A development plan and budget were created, which identified two road blocks. First, the current market price of the property as being sold by the county and second, the balance of the assessments currently assigned to the parcels.

"What we have found is that when we undertake this, it takes some community support in order to make it happen," Thompson explained. "We have put together a request for both the county and the city to play a role in order to make this happen."

At their Oct. 3 meeting, the Hubbard County Board of Commissioners agreed to sell all 11 parcels at a purchase price of $1 each.

Thompson reminded the council that the unpaid assessments total $161,050. The HRA is asking that the City accept a payoff of $53,350.

HRA plans to build 11 homes for low- to moderate-income families over the course of five years. In order to ensure they do not overbuild for the demand, they will be constructing two homes each year starting in the spring of 2018, unless they need to increase production due to a higher demand.

"If the city is willing to entertain our request for the reduction of the assessments, we'll be able to just break even on that project," Thompson explained, adding that the projected construction costs for each home must be $155,000 or less.

According to the proposal, the houses will be slab on grade, three bedrooms, two bathrooms with attached two stall garages. The HRA believes the homes will sell for $155,000.

"We think that that is affordable to the market that we're trying to target," Thompson said. "It's a sale price that isn't largely available in this community and we think that it will be one that will hit a wide variety of owners."

In order to qualify for purchase of the homes, buyers must have a household annual gross income at or below 80 percent area median. For 2017, the maximum household income for a family of four is $64,300.

"We really feel that we can break even on this project and end up with 11 new homes in the community," Thompson said. "What that will do is provide additional tax base to both the county and the city, where they wouldn't have that otherwise."

"The crux of the city's involvement is whether or not you're willing to discuss the abandonment of all or part of the assessments," City Administrator John McKinney said. "The properties have already gone into forfeiture and over-the-counter sale so this is something to help that sale happen."

The city council expressed concern as to whether or not the lots would look complete after construction of the home, with tarred driveways and adequate landscaping.

Thompson explained that after construction, they are required to plant a certain number of both trees and shrubs as well as grass. She added that the driveways would be graveled but that the funding is not in place for tarred driveways.

"I'm all for affordable housing. I just hate when neighborhoods are developed and the yards aren't done and the driveways aren't done," Councilmember Erika Randall said. "I'm concerned about a development that will have yards that look undone. It may just be a personal preference, but a neighborhood full of gravel driveways in city limits, I don't love it."

Councilmember Ryan Leckner questioned whether or not they could request that the driveways be completed.

"You can request anything you want. The issue is that we have to figure out a way to pay for it. If we expect that the sale price is going to be about $155,000 and then I have to start figuring out how I'm going to use that $155,000. My experience shows that the contractor will take about $145,000," Thompson responded. "That leaves me $10,000 to pay all of the other things that are related to the development. So tarring driveways will be another cost that has to come out of there, and what that means is I have less money to pay for the assessments. It's not that I'm unwilling to do that, but I have to find resources to make that happen and these numbers are very tight."

"That might be worth exploring if we're going to give up this much of the assessments anyway," Randall said. "I just want it to look finished. To me it's worth giving up more of the assessments so that it's a finished neighborhood."

The council members all agreed to explore the option of further reducing the assessment payments and referred the proposal back to staff to negotiate a specific proposal and bring it back to them for approval.