Answers to Submitted Questions Request for Qualifications - TIF Scattered Site Rehabilitation Program Date: March 9, 2017

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1 Answers to Submitted Questions Request for Qualifications - TIF Scattered Site Rehabilitation Program Date: March 9, How do I apply? You can download the application in Word document format here: Program.docx Application instructions and program details are available here: pdf 2. The application asks you to provide references. Do you want just the names or the references or do you need letters from the references? Please provide a letter or statement from each reference. 3. Are you looking for demolition contractors to take down those houses that are deemed unsuitable/inhabitable to be used for this project and must be taken down? For this program we are looking for developers who can manage all stages of rehabilitation of properties from acquisition, to rehab and construction, to marketing and resale. Additionally, right now we are not actively looking to tear down any homes. In the event the City identifies a home for removal it will use a different program. 4. How many developers are you looking for We do not have an exact number. It will depend on the quantity and quality of the applications we receive. 5. What type of housing units can be rehabbed under this program? Single family detached units or twin homes that are not part of a common interest community. 6. How do you envision the EDA approval process for those properties on the MLS, given the current state of the market (i.e. need to move quickly)? When a property becomes available on MLS and a developer contacts Brooklyn Park, the City staff would try their best respond quickly and make a decision (ideally same or next day). Preferably, the staff program coordinator would go out and look at the property. The developer and City staff person then discuss a rough rehabilitation budget and development gap. If Brooklyn Park staff decides to give the developer preliminary funding approval, the developer could submit

2 an offer. Alternatively, a developer may choose to put in an offer on a property and ask for financial backing later. The risk of this, however, is that if Brooklyn Park does not approve the project, the developer is fully responsible financially (including loss of any earnest money). We will track all properties approved or denied on document shared by all developer partners. 7. What kind of documentation is the EDA staff looking for from potential developers before approval? Prior to approving the home for the program, staff will need to see evidence that the home is distressed. This could be accomplished by visiting the property or viewing photos. Staff will also need the developer to provide an estimated development gap and resale price. After an offer is accepted, the developer will do a walkthrough of the property with staff and submit a loan requisition form that breaks down specific costs (see Exhibit 1 Loan Requisition and Gap Calculation Example). 8. What type of restriction is placed on the homes in this program? A deed restrictions prohibiting rental is required on all homes. The developer will sign and record a declaration of restrictive covenants at acquisition that prohibits rental for 30 years. If the property is resold, the restriction transfers to the next homeowner until restriction period expires. The exception is if a home goes through foreclosure before the 30 year period is over, the restrictive covenant may be removed. 9. What are the types of eligible rehab activities? The homes in this program will be rehabbed top-to-bottom. Homes must conform to program rehabilitation standards, but the scope of work will be determined on a house-to-house basis by the developer in partnership with City staff. Common repairs include roofing, flooring, siding, windows, insulation, electrical, plumbing and heating systems, as well as reasonable aesthetic improvements to bring home in line with the current market trends. 10. Does the City of Brooklyn Park provide buyer assistance in this program? No, the City of Brooklyn Park does not provide any down payment or buyer assistance in this program. Homeowners can utilize resources from other entities (such as the Minnesota Housing Finance Agency) in the purchase of these homes. 11. If there is no buyer s assistance offered through this program, what is the advantage to the homebuyer Homebuyers will have access to high quality homes. 12. How do the numbers for gap payment breakdown?

3 The development gap is the total development costs minus the sale price of the improved property. Total development cost means costs incurred by the developer in acquiring, rehabbing, and selling the property. This includes items such as: Architectural, engineering, environmental testing and other professional services fees Construction supervision Marketing fees not to exceed 5% of the greater of acquisition and rehabilitation costs or sale price Development Fees not to exceed 8% of the greater of acquisition and rehabilitation costs or sale price Title and closing costs Governmental fees, utilities, insurance, taxes, and carrying costs The developer requests a maximum development gap amount prior to acquisition of the property based on a pro forma loan requisition form (see Exhibit 1 Loan Requisition and Gap Calculation Example). If at the end of the project the development gap is over the agreed upon amount, the remainder of the gap will be subtracted from the developer fee. 13. How much funding has been allocated to this program? At the moment, the EDA has designated $500,000 in TIF affordable housing funds to the program. This amount will cover gap funding and program administration. The goal is to rehabilitate 9-10 properties with these funds in More funding may or may not be allocated to this program in the future. 14. Is there a requirement for exterior landscaping? If so why? All rehabbed units need to have exterior landscaping and improvements done. A budget of $3,000 is set for this activity. Landscaping enhances the curb appeal and value of the unit and provides a community and neighborhood benefit. 15. Will Brooklyn Park EDA provide loans for both acquisition and rehabilitation work? Yes. Brooklyn Park will finance both acquisition and rehab through a loan to the developer. The loan will be secured by a mortgage on the property and promissory note. 16. Are there any developers selected for this program? No developer has been selected for this program yet. 17. Is there any list of selected rehab properties? No. Brooklyn Park will largely rely on the developers to locate potential properties. The City s Code Enforcement and Public Health division does monitor and track vacancies and City staff can share the list of vacant homes with the developers selected to participate in this program.

4 18. Who is responsible for researching the title? The developer is responsible for searching the title and ensuring that it is clean. As part of the acquisition process the developer will need to obtain an ALTA loan policy of title insurance. 19. Have you handled any tax forfeiture properties? The EDA does on rare occasion handle tax forfeited properties. Recently staff purchased one tax forfeiture property that took almost 8 months to process. We do not anticipate more tax forfeiture acquisitions in What s the structure of the developer fee? The developer fee is the greater of either (1) 8% of the acquisition and rehabilitation costs or (2) 8% of the sale price. 21. What happens if there is a profit on a property? Will the City request any of the developer s profits on a rehabbed property? The developer does not receive profit on the home, but rather is paid a developer fee. If the project were to be profitable, the profit would go to the Brooklyn Park EDA. However, profit is extremely unlikely because the EDA is targeting homes that have a development gap and would not be rehabbed by the private market were it not for public assistance. 22. Can the City handle overseeing multiple properties at one time? Yes, staff has experience working on multiple properties at once. 23. Can the program be used for those who currently own a home and want to rehab it? No. Developers must buy a vacant home and market the rehabbed home to all potential buyer on MLS before resale.

5 Exhibit 1 Loan Requisition and Gap Calculation Example ITEMS Estimated Value/Bid Acquisition Contract Sales Price 132, Settlement Charges 1, Other fees 1, TOTAL ACQUISITION COSTS 134, Soft Costs Architecture Advertise bids Builder's Risk Insurance Energy audit test/weatherization Engineering/Survey Environmental Testing-Reports - Lead Paint Maintenance Costs Taxes Radon Testing Utilities TOTAL SOFT COSTS Hard Costs Appliances Cabinetry & Countertop - Kitchen & Baths Concrete Work Deck Fix Doors - Interior/Exterior/Garage Dumpster Electrical Fixtures and Lighting Electrical Wiring Fence Floors (vinyl + tile) Floors (wood and carpet) Gutters & Downspouts / Sheet metal HVAC - venting/fans HVAC - furnace Insulation Railings Landscaping - General site Work Wall and Ceiling Repair Millwork-Trim Painting - Exterior Painting - Interior Plumbing - Labor & Fixtures Roofing & exterior work Rough Carpentry Demo shed in rear yard Trim/Soffit/Fascia Water Heater Accessories-Specialties Remove wall at Dining/Living Area

6 A/C Windows & screens Subtotal oversight and contractor's fee, if applicable (not to exceed 10% of subtotal) TOTAL HARD COSTS Contingencies Soft Cost Contingencies (4%) Hard Cost Contingencies (8%) TOTAL CONTINGENCIES Rehabilitation Soft Costs Hard Costs Contingency Total Rehabilitation TOTAL ACQUISITION AND REHAB COSTS (TARC) Fees Developer's Fee (8%) - est. from sales price or TARC Marketing Fee (5%) - est. from sales price or TARC TOTAL FEES Re-Sale Settlement charges to seller (less marketing) Other TOTAL RE-SALE Total Acquisition Total Rehabilitation Costs Total Fees - (est. based on TARC) Re-Sale TDC TOTAL DEVELOPMENT COSTS (EST.) Development Grant Election Estimated Sales Price $ 220, Estimated Total Development Costs $ 266, Development Gap $ 46, This property shall be eligible for Development Grant assistance in an amount up to the development gap amount as follows: This property shall be eligible for a loan in an amount up to the Total Development Costs as follows: $ 46, $ 266,106.74