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HomeMy WebLinkAbout06/07/2010 Council Packet• • • WORK SESSION AGENDA CITY OF LINO LAKES Monday, June 7, 2010 CITY COUNCIL WORK SESSION Community Room (not televised) *5:30 P.M. *(meeting will commence upon adjournment of special council meeting) 1. Cottages of Willow Ponds, request from buyer to subordinate city's contract and covenants to HUD (purchaser Chuck Reisenberg, Lino Lakes Housing Limited Partnership) 2. County Ditch 10 -22 -32 Repair Reports — Doug Thomas, Rice Creek Watershed District 3. English as Official Language to follow 4. Liquor License Renewal Issues 5. Police Department Annual Report 6. Police Officer Position 7. Signal Justification Report Update 8. Comprehensive Plan 9. 2008 Charter Commission Proposed Charter Amendment 10. Joint Meeting with Charter Commission 11. Organizational Study to follow 12. Reschedule July Work Session Review Regular Agenda Adjourn to follow 617 12.olb Request to the City of Lino Lakes to subordinate its senior occupancy restrictive covenant on Willow Ponds for City Council Work Session City of Lino Lakes Monday, June 7, 2010 Charles E. Riesenberg Lino Lakes Housing Limited Partnership President Community Capital Financial Advisory Services, Inc. 1 • • • Outline Introduction Background on buyer's request Current status Issue to resolve page 3 4 5 6 Dynamic project characteristics requires us 7 to discuss and appreciate a set of facts A greater risk to the City of Lino Lakes is 11 the loss of the state's income, rent and disability covenants. Summary 12 2 • • • Introduction As Chief Manager of the general partner, I represent the Lino Lakes Housing Limited Partnership. Lino Lakes Housing LP entered into a purchase agreement with the current owner of the Homesteads of Willow Ponds Limited Partnership, a 47 unit section 42 senior rental housing project in Lino Lakes, Minnesota. In the last year, my limited partnership has worked closely with our lender, Dougherty Mortgage LLC, to arrange acquisition financing through a FHA insured new first mortgage loan. Our loan application efforts were successful in February when FHA issued our partnership a commitment to insure. Shortly after the commitment was issued, in April the lender entered into a rate lock purchase agreement with an investor. One significant issue we negotiated with HUD prior to the commitment issuance was the City's senior occupancy restrictive covenant. The underwriters did not like the restriction and viewed it as a market impairment to leasing the project long term. After weeks of negotiations and presentation of historical occupancy rates, rent roll analysis, projections showing strong future demand for senior housing demographics in Anoka County, and the lack of areawide affordable senior housing competition and the future unlikelihood of new construction providing competition to Willow Ponds based on MHFA's long standing policy prohibiting section 42 senior housing tax credit allocations, HUD finally accepted the City's senior occupancy covenant. 3 SBackground on buyer's request to Lino Lakes EDA to consent to assigning TIF benefits to buyer • • As you remember, in April we met at City Hall where I presented a request on behalf of the Lino Lakes Housing Limited Partnership to the Lino Lakes EDA to consent to the assignment of the Contract for Private Redevelopment between the seller, Willow Ponds Limited Partnership, and the buyer, Lino Lakes Housing LP. As part of my request I presented a draft assignment of the TIF benefits between the seller and buyer and outlined the need for the City's consent. Shortly thereafter your City attorney modified the form of agreement between the buyer and seller. After reviewing the City's recommended modifications I concurred and shortly thereafter you presented me with the one page City consent form signed by you thus evidencing the City EDA's approval of the assignment. As part of our request I offered and shared our financing commitment letter, capital needs assessment and environmental report, etc. We discussed the project and its history and I stated our willingness to share any other documentation the City may need in reviewing our request. You asked for a copy of the annual section 42 restrictive use compliance documents required by MHFA. I believe I furnished you with the document and there were no other requests from the City for information. Thank you again for consenting to the assignment of the City's TIF assistance to our partnership. Attachment A is our February 18th commitment, Attachment B is the CNA. 4 • • • Current status Currently we have satisfied all the required forty two commitment conditions in the February 18th COMMITMENT TO INSURE UPON COMPLETION issued by HUD except for condition #36: "The T1F covenants will need to be subordinated to the insured mortgage and amended to conform to MAP requirements. ". As part of closing and to satisfy condition #36 identified above, our lender's attorney presented to the City several standard HUD subordination agreements for execution. Please see attachment D. Two days before closing, the City attorney informed us the City was unwilling to sign the subordination agreement as presented. We checked back with the HUD attorney and he informed us that the subordination agreement is a standard national loan policy and cannot be waived. Unable to gain the City's approval to subordinate its restrictive covenant to the proposed lender we cancelled closing one day before its scheduled date. Furthermore, please be informed that after discussions with the State of Minnesota, MHFA agreed to subordinate its series of restrictive land use covenants establishing affordable rents, tenant incomes and disability requirements to the first mortgage lender as requested and required by HUD. The MHFA LURA is attachment D. And finally, I was informed by the HUD office, they cannot recall any state or municipality not agreeing to subordinate its covenants to the ft mortgage lender in regards to a similar refinancing transaction. In summary, I assumed that after presenting the "commitment to insure" document as part of the background information submitted for City review of the consent to assign project TIF benefits, the requirement to subordinate TIF covenants would be in fact understood and acknowledged. Our lender recently issued a NOTICE AND REQUEST FOR SUBORDINATION to the City of Lino Lakes on May 26th found in attachment C 5 • • Issue to resolve It is clear that the City does not wish to subordinate its Exhibit C, the senior occupancy covenant to the lender. The issue is that if the project fails and the lender forecloses, the lender may want to sell the property to an owner desiring not to limit occupancy to seniors. 6 • • • Dynamic project characteristics requires us to discuss and appreciate a set of facts It is unfortunate our request to acquire and refinance Willow Ponds has resulted in a perception the proposal is not consistent with the City's policy to retain the project for Lino Lakes senior citizens. I can clearly state as the proposed buyer of Willow Ponds, it is my intent to keep the project consistent with the last 13 years of operation, a high quality affordable senior rental housing project. My position is that the proposed ownership team and subsequent refinancing, in fact, advances the City's policy to retain Willow Ponds long term as an affordable senior housing project to serve the needs of elderly citizens. Willow Ponds is a complicated real estate development with a dynamic set of economics and restrictions worthy of a full and deliberate discussion between the proposed buyer and the City of Lino Lakes to fully appreciate how the proposal is consistent with City policy. Below are the facts I wish to present for discussion: 7 1. There is a set of multiple restrictive covenants on the property of which only one is the City's senior occupancy covenant. More demanding to the project's operation are the series of restrictive covenants placed on the property by the State of Minnesota as part of the original section 42 tax credit allocation process. Specifically, the MHFA restrictions limit all occupancy to persons /families earning less than 60% of the Anoka County median income. Second, the rents must be no higher than 30% of the 60% income restriction normalized for number of persons in a household The third restriction is to rent 50% of all the units to persons with disabilities. Please note: ■ rents are priced $100 below market ■ 30% of the tenants earn less than 50% Of Anoka County average. • For the last thirteen years, the project has fully complied with all the above listed restrictions as certified by the owner and accepted by MHFA. Attachment E is a copy of Willow Ponds MHFA LURA outlining the state's restrictive covenants. • • 8 2. The only known reason for not renting to seniors would be project failure upon the lender foreclosing, I believe. To directly address this risk it is important to understand the following: a. Willow Ponds with all its covenants has performed at a consistently high economic level since construction: • vacancy levels are low and have averaged each year at an overall rate of 5 %. ■ debt service coverage has averaged consistently at 1 to 1.2 ratio. • annual average turnover is very low with only two tenants per year; 13 tenants are original and over one half of the seniors have rented for more than 5 years. The primary tenant "move -out" is due to involuntary onset of aging. b. After a through third party capital needs assessment report, the current physical property quality is rated as good. However, due to the age of the property, over the next 15 years some $400,000 of replacement investments will be needed to keep the property in good shape. See Attachment F, Willow Ponds CNA. c. While the market for affordable senior rental housing in Lino Lakes has proven to be strong, this trend will prevail in the future wherein demographic projections identify older aged residents as the fastest growing segment for Anoka County. Therefore, the City of Lino Lakes senior use restrictive covenant has never been nor expected to b e in the future a market burden. d. Willow Ponds was originally designed and developed for a senior population: one level cottage style architecture. The proposed purchase and refinancing will not alter the past and current operations. All restrictions will stay in place while the same property manager will be retained. e. The proposed refinancing will significantly improve the market position of the project to operate the project long term. The buyer has arranged the market's most desirable form of rent real estate financing possible: a low rate 35 year fixed 15` mortgage loan • • • 9 3. Typical to many affordable housing projects, there is a comprehensive 15 year risk event wherein a series of circumstances will shortly impact the project's economic well being: o the TIF assistance will terminate — refer to TIF agreement with City terminating assistance in 2012. o the existing 1st mortgage loan comes due in 2012 and relied on TIF income for debt service coverage o the MHFA restrictions become optional in 2011 o the need for investing in physical replacements increases — refer to CNA report 4. While there is no certain implication to the end of the first fifteen year period of operation, the proposed acquisition and refinancing plan manages and alleviates the year fifteen risks prior to waiting until the event takes place. Assuming the TIF assistance expires and the existing 1St mortgage note comes due, the only option is to refinance the project may be with a commercial bank which may mean less favorable terms, much higher rates, and loss of TIF income. Here is how the proposed refinancing plan lessens the risk of project failure coming from the 15 year event and places the project on a superior set of economic principles long terms to serve the senior tenants desired by all. To manage the loss of TIF assistance: the new loan assumes no income from TIF and underwrites the project only on affordable, restrictive rents currently required. • To manage the future risk of higher interest rates and unfavorable commercial bank terms: the new loan is at a very low 4.5% rate, and fixed for 35 years. In fact, the buyer is paying over $125,000 in prepayment penalties to pay -off the current mortgage and not to wait for refinance in 2012. Most nationally recognized economic projections call for long term interest rates to significantly increase in future years. Our new annual financing is some $20,000 Tess in debt service costs than the current mortgage obligation. • The track record of FHA insured multifamily loans is excellent with less likelihood to fail than commercial bank loans. To the best of our knowledge only two loans have ever been foreclosed and none on senior housing. Our lender's record is only one foreclosure in five states. • • • 10 IT MUST BE NOTED HERE BASED ON THE FACT THE CURRENT 157 MORTGAGE LOAN BECOMES DUE AND PYABLE IN EARLY 2012, THE SAME TYPE OF LENDER SUBORDIANTION REQUIREMENTS WILL /MAY BE REQUIRED OF THE CITY AS THOSE PERSERNTED TODAY. To manage the future risk of not having sufficient funds to invest in physical replacements, the buyer is required to fully fund capital needs in cash of $130,000 in a special reserve, making $30,000 in improvements this year and setting aside $15,275 per year in a special reserve fund managed by the lender, a doubling of the current annual replacement reserve requirement. • Of the restrictive covenants, the MHFA income, rent and disability limitations impede market performance vs. the City's senior occupancy preference. As stated above, the Lino Lakes senior market is very strong thus the City covenant is not viewed as a market limitation but an advantage. The three MHFA restrictions, however, need to viewed as market restrictions. • Be aware of the typical actions the owner would take if the project were to experience economic stress. A series of remedies would be applied well in advance to foreclosure. First, and as expressed herein, the owner would broaden its capacity to fill the units by not following MHFA covenants and leasing to all seniors, regardless of income, possibly raise rents, and fill the units with non - disabled tenants. After fifteen years it is the policy of MHFA to permit relaxation of its covenants if economic stress takes place. Please refer to Attachment F, MHFA's tax credit compliance manual on the same. To the extent the project is foreclosed, MHFA covenants would be eliminated thus it is in their best interest to work with owners to avoid economic failure due to their restrictions. Please note here MHFA has agreed to subordinate its restrictive land use covenant to the proposed lender, similar to the request made to the City. • A greater risk than losing the preference for senior housing is the Toss of the state's income, rent and disability covenants. Willow Pond's MHFA restrictive land use covenant does not automatically extend the restrictions beyond the first 15 year period. Consistent with MHFA policy and the attached MHFA Housing Tax Credit Program, Qualified Contract Process Guide, Attachment G, Willow Ponds can opt -out of its restrictions and convert to market rate rents, higher income tenants, and provide no requirement to rent to disabled tenants. In fact, the project could be sold as condominiums. The City's covenant does not restrict occupancy to leasing, I believe. If the project characteristics are not addressed currently, the likelihood of eliminating the existing income and disability restrictions would be enhanced. Per the recent property appraisal, market rate vs. restricted rents increases the property value by $700,000. The question to ask is: why would an owner not seek higher economic values as presented in the market place vs. keeping restrictive rents and tenant qualifications of incomes and disabilities? My proposal is to keep the project not only for seniors but for continued affordable rents and disability characteristics. I believe the City's generous TIF assistance was not for the sole purpose of limiting the project to seniors but was predicated on thirty years of affordability and disabled tenant preference. The original TIF plan and state law in 1995 would not permit local public assistance for market rate seniors. The cornerstone of the TIF assistance is to create and preserve affordability and not to singularly restrict occupancy to seniors. In summary, the option to convert to market rate conditions may be the greatest threat of not approving the proposal as presented here. 11 • • • Summary If the City views the subordination issue as losing the senior preference to the control of the new lender, I suggest this proposal does just the opposite and takes concrete steps to lessen the likelihood of project failure long term. The more demanding issue challenging Willow Ponds is the real potential of losing the project's affordable tenant base, rent structure, and disability requirements. Finally, Willow Ponds needs to be refinanced in the near future. The subordination issue will not go away if my proposal is denied. The best method to address the City's subordination issue is to deal with it now and accept the new owner and refinancing plan as proposed here. 12 • ATTACHMENTS Attachment A: February 18, 2010 Commitment to insure upon completion, Cottage Homesteads of Willow Ponds Attachment B: Willow Ponds Capital Needs Assessment Attachment C: May 26, 2010 Notice and request for subordination of Willow Pond's Contract for Private Redevelopment Attachment D: Lender requested City Subordination Agreements Attachment E: Willow Pond MHFA LURA Attachment F: MHFA's tax credit compliance manual Attachment G: MHFA Housing Tax Credit Program, Qualified Contract Process Guide 13 • U.S. Department of Housing and Urban Development Minnesota State Office 920 Second Avenue South Suite 1300 Minneapolis, Minnesota 55402-4012 COMMITMENT TO INSURE UPON COMPLETION SECTION 207 (PURSUANT TO SECTION 223(F)) Mr. Tim Larkin FEB 1 8 Mir Mortgage LLC. 90South 7th Street Suite 4300 Minneapolis, MN 55116 Dear Mr. Dayton: Project Number: 092 -11264 Project Name: Cottage Homesteads of Willow Pond Mortgagor: Lino Lakes Housing LP Location: Lino Lakes, MN ( tt We understand that you, as Mortgagee, have agreed to make a loan to Lino Lake Housing LP.., hereinafter called the "Mortgagor ", in an amount not exceeding the sum of Two Million Seven Hundred Eighty Three Thousand Dollars, ($2,783,000) to be secured by a credit instrument and security instrument (hereinafter jointly called the "Mortgage ") covering real property with existing building(s) thereon, (hereinafter called the "Project "), located in the City of Lino Lakes in the State of Minnesota at 101 Willow Pond Trail, as shown on the as -built survey Surveyor's Certificate and legal description of the property. It is your intention to present the said Mortgage to this Administration for mortgage insurance under the provisions of Section 207, pursuant to Section 223(f) of the National Housing Act, and the Regulations thereunder now in effect. The Federal Housing Commissioner acting herein on behalf of the Secretary of Housing and Urban Development agrees to insure said Mortgage under the provisions of said Act and Regulations upon the following conditions: 1. Prior to endorsement of the Mortgage for insurance, the Mortgagor shall present to the Commissioner a title policy or title evidence in conforming to the above mentioned Regulations which shall show that title to the property on the date of endorsement of the Mortgage for insurance is vested in the Mortgagor, free of encumbrances other than said Mortgage and exceptions to title (either junior or prior to said Mortgage) except such as are specifically determined to be acceptable by the Commissioner. The Mortgagor shall also furnish satisfactory proof that there exist no unpaid obligations contracted in connection with the Mortgage transaction, the purchase of the mortgaged property, refinancing of existing indebtedness, or the completion of repairs, except such obligations as may be approved by the Commissioner. If such title evidence is in the form of a title insurance policy, it shall by its terms, inure to the benefit of the Mortgagee and /or the Secretary of Housing and Urban Development, as their interests may appear. If under the www.hud.gov espanol.hud.gov • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 2 laws of the jurisdiction where the Project is located the chattels and personal property of the Mortgagor required in the operation of the Project are not covered by and subject to the terms of the Mortgage, the Mortgagee must require and receive from the Mortgagor a chattel mortgage or such other security instrument as may be necessary covering such personal property and chattels. 2. The Mortgage shall bear interest at the rate of 4.50 percent per annum payable on the first day of each month on the outstanding balance of principal. The first payment to principal (commencement of amortization) shall be due not later than the first day of the second month following the date of endorsement of the Mortgage for insurance. The Mortgage shall be payable on a level annuity basis of 420 monthly payments of principal and interest of $13,170.73. The maturity and final payment date shall be 34 years and 11 months following the due date of the first payment to principal. 3. The credit instrument and the security instrument to be insured shall be in the form prescribed by the Commissioner for use in connection with Section 207 loans in the locality where the property is located. 4. The Mortgagor must possess the powers necessary for operating the Project and meeting all the requirements of the Commissioner for insurance of the Mortgage. Prior to endorsement of the Mortgage for insurance, there shall be filed with the Commissioner a copy of the instrument under which the Mortgagor entity is created (unless the Mortgagor is an individual) together with copies of all instruments or agreements necessary under the laws of the applicable jurisdiction to authorize execution of the Mortgage and the other closing documents, and a Regulatory Agreement or other instrument as will permit the Commissioner's regulation of the Mortgagor as to rents, charges and methods of operation. Such instrument shall provide, among other things, for the establishment of a Reserve Fund for Replacements by payment of 15,275 per annum to be accumulated monthly under the control of the Mortgagee, commencing on the date of the first payment to principal as established in the insured Mortgage unless a later date is agreed to by the Commissioner. In addition to the per annum amount required to be accumulated monthly under control of the Mortgagee for the Reserve Fund for Replacements, there shall be an initial deposit made to the Reserve Fund for Replacements of no less than $128,150. 5. If any repairs are to be made to an existing project that require additional sewer, water, gas or electrical facilities, evidence satisfactory to the Commissioner shall be submitted prior to endorsement of the Mortgage for insurance showing that adequate sewer, water, gas and electrical facilities have been fully installed and that necessary public streets, sidewalks and curbing outside the Project site have been completed. All off -site facilities or utilities required by the special conditions under this commitment shall be included in such evidence. www.hud.gov espanol.hud.gov • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 3 6. Prior to the endorsement of the Mortgage for insurance, evidence shall be submitted to the Commissioner that the buildings, including electric wiring, plumbing, gas and other appliances therein have been inspected and approved by all departments, boards or agencies of the municipality, county or state, or other governmental bureaus or departments having jurisdiction thereof, and by the rating or inspection organizations, bureau, association or body performing similar functions that such certification as may be required with respect to the approval of said buildings for occupancy and otherwise as may be required by the Commissioner, have been issued to the Mortgagor. 7. Prior to the endorsement of the Mortgage for insurance, the Commissioner shall be furnished with a current as -built survey duly certified to by a registered surveyor satisfactory to the Commissioner and an up -dated Surveyor's Certificate showing that there are no easements or encroachments upon the subject property except those approved by the Commissioner and that the improvements of the Project are contained upon the land covered by the Mortgage and within the building restriction lines, if any, on said land and do not encroach upon or overhang any land not covered by the Mortgage or beyond the said building restriction lines, if any, nor any easement or right -of -way. The survey shall also show the exact location of water, sewer, gas and electric mains, and all easements for such utilities then existing. 8. Upon endorsement of the Mortgage for insurance, the Mortgage must be current with respect to all payments required to be made by its terms, including all deposits required to be made with the Mortgagee for mortgage insurance premiums, fire, and other property insurance premiums, ground rents, water rates, taxes and other assessments; and there shall be in full force and effect fire and other property insurance as required by the insured Mortgage. This includes an estimated amount of $ -0- in unpaid special assessments. 9. Upon endorsement of the Mortgage for insurance, the Mortgagee shall pay to the Commissioner in advance, a mortgage insurance premium equal to one percent of the principal amount of the insured Mortgage to cover the first mortgage insurance premium and shall continue to make payments thereafter as required by the aforesaid Regulations. 10. Prior to endorsement of the Mortgage for insurance, the Mortgagor must certify under oath that in selecting tenants for the property covered by the Mortgage, the Mortgagor will not discriminate against any family by reason of children in the family, unless the Commissioner determines the Project is intended primarily for occupancy by the elderly or handicapped and is not compatible for occupancy by families with children, and that the Mortgagor will not sell the property while mortgage insurance is in effect unless the purchaser also so certifies and files such certification with the Commissioner. 11. Prior to endorsement of the Mortgage for insurance, the Mortgagor must certify under www.hud.gov espanol.hud.gov • • • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 4 oath that so long as the Commissioner has any interest in the Mortgage transaction no part of any building will be rented for a period of Tess than 30 days or operated in such a manner as to offer any hotel services to any tenant in the building or buildings; and that the property will not be sold so long as the Commissioner retains any interest therein, unless the purchaser files with the Commissioner a like certification executed by such purchaser under oath. 12. The Mortgagor shall not be required to pay to the Mortgagee an initial service charge in excess of two percent (2 %) of the original amount of the mortgage. 13. This commitment shall expire 90 days from the date hereof, unless extended by the Commissioner. Prior to any extension of this commitment, the Commissioner may, at his option, reexamine the commitment to determine whether it shall be extended in the same amount, or shall be amended to include a lesser amount. 14. You must advise the Commissioner of your acceptance of this firm commitment by signing on the line indicated and returning such executed copy to the Commissioner on or before closing. 15. Prior to the execution of any repair contracts relative to the Project, the Agreement and Certification Form Number 3306 shall be executed by the Mortgagor, Mortgagee, and the Federal Housing Commissioner and the Mortgagor shall be bound thereby with respect to any subsequent contracts or subcontracts. The commitment amount herein above is subject to appropriate reduction in accordance with the terms of the Agreement and Certification. This form shall be modified to HUD's satisfaction prior to closing. 16. It is a condition of this commitment that any change in sponsorship upon which this commitment was predicated must be indicated in writing by the Mortgagee on behalf of the proposed substitute sponsor(s) and such request must be approved in writing by the Commissioner. 17. Prior to endorsement, the Mortgagee must provide the field office with all required closing exhibits including FHA Form Number 2455, Request for Endorsement of Credit Instrument Certificate of Mortgagee, Mortgagor and General Contractor, and a certified loan closing statement signed by the Mortgagee and Mortgagor detailing the amount of any promissory notes made by the Mortgagor and any cash contribution made by the Mortgagor. The statement must also itemize the disbursement of the Mortgage proceeds and of the Mortgagor's cash contribution, if any. The statement regarding the disbursements must be specific and list the amounts to be paid to satisfy the Mortgagor's obligations for: existing or other indebtedness in a refinancing transaction; discounts; financing fees; legal expenses; organizational expenses; title and recording costs etc. and www.hud.gov espanol.hud.gov • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 5 any Mortgagee required escrows for GNMA, taxes, or insurance. 18. You are advised that restrictive covenants purporting to prohibit the use of this property to house anyone receiving the benefits of any subsidy and /or rent guarantee program, or any other restrictions that may be construed by the Department of HUD to be contrary to the intent and spirit of the Federal housing statutes, will render this proposal unacceptable for mortgage insurance purposes. SPECIAL CONDITIONS: 19. Prior to closing, please submit an analysis of the property insurance and real estate escrow account. If the current project account is not adequate it must be funded at closing. 20. An inspection fee of $1,410 must be paid prior to endorsement of the mortgage. 21. This project has been processed with the use of Low Income Tax Credits as certified by the Sponsor. 22. An operating deficit escrow amount is not required for this project. 23. If any new management agent, contractor, sponsor, or Mortgagor entities or principals become involved in the project before or after endorsement, HUD 2530 forms must be submitted and approved by HUD for each. All changes or transfers of ownership prior or after endorsement of the Mortgage must include personal and corporate financial statements with FHA Form 2417 certifications, credit reports and 2013 supplement "Bank and Trade References ". After endorsement of the mortgage, any future transfer of interest that results in changes in the sponsorship or composition of the general partners will be subject to full mortgage credit review and approval by HUD. This would include a review of credit reports, bank and trade references, and current financial statements on any new partners or entities. 24. All pending and levied special assessments must be paid in full prior to closing. 25. The sponsor must demonstrate to HUD's satisfaction at the time of endorsement, that all tenant security deposits have been fully funded and in separate accounts. 26. The total 100% insurable value for the subject project will be forwarded to you prior to closing. www.hud.gov esganol.hud.gov • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 6 27. Both the Mortgagor and Mortgagee have submitted certification that funds were not used to lobby for this proposal. 28. Except as specifically approved by HUD, no fixture or item of equipment shall have a lien outstanding against it at the time of closing. 29. The Mortgagor legal documents must comply with the MAP Guide. 30. Prior to closing, a rider to the FHA 2455 form must be submitted. The rider must contain the following language: "The lender must obtain a new Property Capital Needs Analysis (PCNA) every 10 years which covers the next ten years [or the remaining term of the mortgage] plus two years." 31. All secondary debt must comply with the MAP Guide (MAP 8.10). 32. The Criterion 10 calculation on HUD Form 92264a will be adjusted prior to closing to reflect actual closing costs (including the refreshing of the work write up bids). 33. Approval of this commitment is based on the financial capacity of Lino Lakes Housing LLC, Charles Reisenberg, Cherie Reisenberg, Stanley J. Weinberger. The withdrawal of any of these principals can cause HUD to declare this commitment null and void. 34. Any Secondary Financing in the form of a Promissory Note must comply with HUD regulations. 35. The organizational documents of the mortgagor should be revised to conform to MAP requirements. 36. The TIF covenants will need to be subordinated to the insured mortgage and amended to conform to MAP requirements. 37. The LIHTC covenants will need to be modified to permit an override of the physical disability restriction in the event that vacancy exceeds some acceptable percentage. These covenants will need to be subordinated to the insured mortgage and amended to include MAP language. www.hud.gov espanol.hud.gov • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 7 38. The following repairs and alterations are required: Critical Repairs: There are no Critical Repairs required. Non - Critical Repairs: Asphalt Seal Coat Total Non - Critical Repairs: $ 13,770 $ 13,770 In accordance with HUD Handbook 4460.1, Rev -2, December, 1995, all critical work items must be completed prior to endorsement of the mortgage. All other work items may be completed after endorsement upon notification of the HUD Office. However, all work items which are not completed prior to endorsement shall have an escrow set up at 120% of the cost estimate of those remaining items and those work items must be completed within twelve months of closing. Funds will not be released from the 20% escrow until all work is completed. The holdback will be released when all of the following four items have been satisfied: (1) all repairs have been satisfactorily completed, (2) a supplemental cost certification has been approved, (3) evidence of clear title has been provided, and (4) latent defect assurances have been provided or a 2.5% escrow maintained for 15 months following supplemental cost certification. Any funds remaining in the 100% work write up escrow and the20% contingency escrow after completion of all the required repairs /improvements may be used to perform other repairs /replacements (with HUD's prior approval) or return to the borrower less money held for the latent defects escrow. 39. HUD encourages all new construction and all new applications requiring rehabilitation to utilize energy saving devices including Energy Star construction standards and appliances. Therefore, we ask you to explore such energy saving methods and devices in your final plans and specifications. 40. Prior to closing, the partnership agreement shall be revised to correspond with the requirements in the MAP Guide. 41. Dougherty Mortgage LLC., as mortgagee, shall be added to the fidelity bond coverage as an additional loss payee. 42. Any future window replacements will require a Figure 19 showing minimum attenuation of at least 30db. www.hud.gov eapanol.hud.gov • • Project Name: Cottage Homesteads of Willow pond Project #: 092 -11264 Location: Lino Lakes, MN Page 8 This commitment and exhibits referred to herein together with the applicable Federal Housing Administration Regulations constitute the entire agreement between us, and acceptance of the terms hereof is evidenced by the signature and seals of the Mortgagor and Mortgagee upon the lines provided therefore below. SECRETARY OF HOUSING AND URBAN DEVELOPMENT BY: FEDERAL HOUSING COMMISSIONER Dated .z002-c)11(2 By Authorized Agent The above commitment to insure is hereby acknowledged by the undersigned, and we hereby agree to be bound by the terms thereof. Mortgagor Date By Mortgagee Date By www.hud.gov espanol.hud.gov 1 - — • 1241611 AMENDED AND RESTATED DECLARATION OF LAND USE RESTRICTIVE COVENANTS FOR LOW -INCOME HOUSING CREDITS THIS DECLARATION OF LAND USE RESTRICTIVE COVENANTS (this "AGREEMENT"), dated effective as of August 7, 1996, by Cottage Homesteads of Willow Ponds Limited Partnership and its successors and assigns (the "Owner") is given as a condition precedent to the allocation of low- income housing credits by the Minnesota Housing Finance Agency, a public body corporate and politic of the State of Minnesota, Suite 300, 400 Sibley Street, St. Paul, NLN 5510I (MHFA) (together with any successor to its rights, duties and obligations). WITNESSETH: WHEREAS, the Owner is or shall be the owner of a 45 unit rental housing project located on lands in the City of Lino Lakes, County of Anoka, State of Minnesota, more \( particularly described in Exhibit A (legal description) hereto, known as or to be known as ` Willow Ponds (the "Project"); and ._ 3 3-00 c, G WHEREAS, the MHFA has been designated by the Legislature of the State of Minnesota as the housing credit agency for the location of the Project for the allocation of low- income housing credit dollars (the "Credit "); and WHEREAS, Owner has applied to the IvIBFA for an allocation of Credit to the Project; and WHEREAS, the Owner has represented to the MHFA in Owner's Low - Income Housing Credit Application (the "Application ") that Owner shall lease 100% of the units in the-Project to individuals or families whose income is 60% or less of the area median gross income (including adjustments for family size) as determined in accordance with Section 42 of the Internal Revenue Code ("Low-Income Tenants "). WHEREAS, the MHFA has determined the Project would support an annual Credit in the amount of $250,000.00; and WHEREAS, the Owner has represented to the MHFA in Owner's application that it will impose additional rent restrictions or will covenant to maintain the Section 42 rent and income restrictions for additional period of time. (Optional, check if applicable. If not applicable, indicate N /A) N/A WHEREAS, the Code has required as a condition precedent to the allocation of the Credit that the Owner execute, deliver and record in the official land deed records of the county in which the Project is located this Agreement in order to create certain covenants running with the land for the purpose of enforcing the requirements of Section 42 of the Code and the N HFA Occupancy Restrictions found in Section 5 hereof by regulating and restricting the use and occupancy and transfer of the Project as set forth herein; 091196 F'DA1A ■l t 1001JK.k0091 OC >\i 1 WHEREAS, the Owner, under this Agreement, intends, declares and covenants that the regulatory and restrictive covenants set forth herein governing the use, occupancy and transfer of the Project shall be and are covenants running with the Project Land for the term stated herein and binding upon all subsequent owners of the Project Land for such term, and are not merely personal covenants of the Owner. NOW, THEREFORE, in consideration of the promises and covenants hereinafter set forth, and other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Owner agrees as follows: SECTION 1- DEFINITIONS All words and phrases defined in Section 42 of the Code and by Treasury, Internal Revenue Service or Department of Housing and Urban Project regulations pertaining thereto shall have the same meanings in this Agreement. SECTION 2 - RECORDING AND FILING; COVENANTS TO RUN VYITH't'ti.k; LAND (a) Upon execution and delivery by the Owner, the Owner shall cause this Agreement and all amendments hereto to be recorded and filed with the County Recorder of the county in which the Project is located, and shall pay all fees and charges incurred in connection therewith. Upon recording, the Owner shall immediately transmit to the MHFA an executed original of the recorded Agreement showing the date and document numbers of record, or a duly certified copy or the executed original. The Owner agrees that the MHFA will not issue the Internal Revenue Service Form 8609 constituting final allocation of the Credit unless and until the MIHFA has received the recorded executed original; or a duly certified copy, of the Agreement as recorded. (b) The Owner intends, declares and covenants, on behalf of itself and all future Owners and operators of the Project Land during the term of this Agreement, that this Agreement and the covenants and restrictions set forth in this Agreement regulating and restricting the use, occupancy and transfer of the Project Land and the Project (i) shall be and are covenants running with the Project Land, encumbering the Project Land for the term of this Agreement, binding upon the Owner's successors in title and all subsequent Owners and Operators of the Project Land, (ii) are not merely personal covenants of the Owner, and (iii) shall bind the Owner (and the benefits shall inure to the MHFA and any past, present or prospective tenant of the Project) and its respective successors and assigns during the term of this Agreement. The Owner hereby agrees that any and all requirements of the laws of the State of Minnesota to be satisfied in order for the provisions of this Agreement to constitute deed restrictions and covenants running with the land shall be deemed to be satisfied in full, and that any requirements of privileges or estate are intended to be satisfied, or in the alternate, that an equitable servitude has been created to insure that these restrictions run with the land. For the longer of the period this Credit is claimed or the term of this Agreement, each and every contract, deed or other instrument hereafter executed conveying the project or portion thereof shall expressly provide that such conveyance is subject to this Agreement, provided, however, the 091196 F:'DATA M 1000X, 00910CJM 2 • covenants contained herein shall survive and be effective regardless of whether such contract, deed or other instrument hereafter executed conveying the Project or portion thereof provides that such conveyance is subject to this Agreement. (c) The Owner covenants to obtain the consent of any prior recorded lienholder on the Project to this Agreement and such consent shall by a condition precedent to the issuance of Internal Revenue Service Form 8609 constituting final allocation of the Credit: SECTION 3 - REPRESENTATIONS, COVENANTS AND WARRANTTF.S OF nit, OWNER The Owner hereby represents, covenants and warrants as follows: (a) The Owner (i) is a Limited Partnership duly organized under the laws of Minnesota, and is qualified to transact business under the laws of this State, (ii) has the power and authority to own its properties and assets and to carry on its business as now being conducted, and (iii) has the full legal right, power and authority to execute and deliver this Agreement. (b) The execution and performance of this Agreement by the Owner (i) will not violate or, as applicable, have not violated any provision of law, rule or regulation, or any order of any court or other agency or governmental body, and (ii) will not violate or, as applicable, have not violated any provision of any indenture, agreement, mortgage, mortgage note, or other instrument to which the Owner is a party or by which it or the Project is bound, and (iii) will not result in the creation or imposition of any prohibited encumbrance of any nature. (c) The Owner will, at the time of execution and delivery of this Agreement, have good and marketable title to the premises constituting the Project free and clear of any lien or encumbrance (subject to encumbrances created pursuant to this Agreement, any Loan Documents relating to the Project or other permitted encumbrances). (d) There is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending, or, to the knowledge of the Owner, threatened against or affecting it, or any of its properties or rights, which, if adversely determined, would materially impair its right to carry on business substantially as now conducted (and as now contemplated by this Agreement) or would materially adversely affect its financial condition. (e) The Project constitutes or will constitute a qualified Iow- income building or qualified Iow - income project, as applicable, as defined in Section 42 of the Code and applicable regulations. (f) Each unit'in the Project contains complete facilities for Iiving, sleeping, eating, cooking and sanitation (unless the Project qualified as a single -room occupancy project or 091146 F:IDATANI 100Vf:MM00910C. iM 3 (g) transitional housing for the homeless) which are to be used on other than a transient basis. During the term of this Agreement, all units subject to the Credit shall be leased and rented or made available to members of the general public who qualify as Low - Income Tenants (or otherwise qualify for occupancy of the low - income units) under the applicable election specified in Section 42 (g) of the Code. The Owner agrees to comply fully with the requirements of the Fair Housing Act as it may from time to time be amended. The Owner will not during the term of this Agreement refuse to Iease a unit to the holder of a voucher or certificate of eligibility under Section 8 of the United States Housing Action of 1937 because of the status of the prospective tenant as such a holder. During the term of this Agreement, the Owner covenants, agrees and warrants that each low - income unit is and will remain suitable for occupancy. Subject to the requirements of Section 42 of the Code and this Agreement, the Owner may sell, transfer or exchange the entire Project at any time, but the Owner shall notify in writing and obtain the agreement of any buyer or successor or other person acquiring the Project or any interest therein that such acquisition is subject to the requirements of this Agreement and to the requirements of Section 42 of the Code and applicable regulations. This provision shall not act to waive any other restriction on sale, transfer or exchange of the project or any Iow- income portion of the Project. The Owner agrees that the MHFA may void any sale, transfer or exchange of the Project if the buyer or successor or other person fails to assume in writing the requirements of this Agreement and the requirements of Section 42 of the Code. (1) The Owner agrees to notify the MHFA in writing of any sale, transfer or exchange of the entire Project or any low - income portion of the Project. (m) The Owner shall not demolish any part of the Project or substantially subtract from any real or personal property of the Project or permit the use of any residential rental unit for any purpose other than rental housing during the term of this Agreement unless required by law. (n) The Owner represents, warrants and agrees that if the Project, or any part thereof, shall be damaged or destroyed or shall be condemned or acquired for public use, the Owner will use its best efforts to repair and restore the Project to substantially the same condition as existed prior to the event causing such damage or destruction, or to relieve the condemnation, and thereafter to operate the Project in accordance with the terms of this Agreement. (o) The Owner warrants that it has not and will not execute any other agreement with provisions contradictory to, or in opposition to, the provisions hereof, and that in any 091196 FADATASM t 00VIU ,009100 IM 4 event, the requirements of this Agreement are paramount and controlling as to the rights and obligations herein set forth and supersede any other requirements in conflict herewith. SECTION 4 - INCOME RESTRICTIONS; RENTAL RESTRICTIONS The Owner represents, warrants and covenants throughout the term of this Agreement and in order to satisfy the requirements of Section 42 of the Code ( "Section 42 Occupancy Restrictions ") that: (a) (1) (2) X At least 20% or more of the-residential units in the Project are both rent - restricted and occupied by individuals whose income is 50% or less of area median income. At least 40% or more of the residential units in the Project are both rent - restricted and occupied by individuals whose income is 60% or less of area median income. (Check applicable percentage election) (b) The determination of whether a tenant meets the low - income requirement shall be made by the Owner at least annually on the basis of the current income of such Low- Income Tenant. SECTION 5 - MHFA OCCUPANCY RESTRICTIONS (OPTIONAL) This Section is intended to make enforceable those extended use or deeper targeting covenants which the Owner represented to the MHFA in its Application. The Owner represents, warrants and covenants throughout the term of this Agreement that: (check if applicable) (a) Applicable Not Applicable X For a period of five years following the placed in service date for each building, % of the units shall have gross rents established at a level not greater than 30% of area median income. (b) X Throughout the term of this Agreement, 100% of the units shall be rented to tenants with 60% or less of area median income, adjusted by family size, with gross rents not to exceed 30% of income. (c) X The Owner will extend the Section 42 income and rental restrictions over 30 years after the close of the compliance period. 091196 F:'DATAwt I00 JxM 00910CJM 5 (d) X Throughout the term of this Agreement, the Project shall provide family housing that is not restricted to persons 55 years or older in which at least 75% of the units contain two or more bedrooms and at least one -third of the 75% contain three or more bedrooms. (e) X Throughout the term of this Agreement, the Project shall provide at least 50% of the units for single room occupancy housing with one bedroom or less rents-affordable at 30% of median income. (f) X Throughout the term of the Agreement, the Owner shall rent at least 24 units to persons with physical disabilities in accordance with the provisions of the Addendum to Exhibit C of the Amended and Restated Commitment and Carryover Agreement dated July 18, 1996 and entered into by the Owner and the MHFA, a copy of which is attached as Exhibit B. Regardless of any provision in Section 6 of this Agreement to the contrary, the MHFA Occupancy Restrictions provided by this Section shall remain in place for a period described above except in the case of foreclosure of deed in lieu of foreclosure. SECTION 6 - TERM OF AGREEMENT (a) Except as hereinafter provided, this Agreement and the Section 42 Occupancy Restrictions specified herein shall commence with the first day in the Project period on which any building which is part of the Project is placed in service and shall end on the date which is 15 years after the close of the compliance period. Notwithstanding subsection (a) above, the Owner shall comply with the requirement of Section 42 relating to the extended use period for an additional 15 years, provided, however, the extended use period for any building which is part of this Project shall terminate: (b) (1) On the date the building is acquired by foreclosure or instrument in lieu of foreclosure; or (2) On the last day of the compliance period if the Owner has properly requested that the MHFA assist in procuring a qualified contract for the acquisition of the low - income portion of any building which is a part of the Project and the MHFA is unable to present a qualified contract. 091 k % F\DATA M I WVKM\OO910C.7M 6 (c) Notwithstanding subsection (b) above, the Section 42 rent requirements shall continue for a period of three years following the termination of the extended use requirement pursuant to the procedures specified in subsection (b) above. During such three year period, the Owner shall not evict or terminate the tenancy of an existing tenant of any low- income unit other than for good cause and shall not increase the gross rent above the maximum allowed under the Code with respect to stfch low - income unit. (d) If the Owner has agreed to optional MHFA Occupancy Restrictions as reflected in Section 5 of this Agreement, this Agreement shall not terminate until the time period for compliance with such MHFA Occupancy Restrictions has expired. SECTION 7 - ENFORCEMENT OF MIHFA OCCUPANCY RESTRICTIONS (a) The Owner shall permit, during normal business hours and upon reasonable notice, any duly authorized representative of the MHFA to inspect any books and records of the Owner regarding the Project with respect to the incomes of Low- Income Tenants which pertain to compliance with the MHFA Occupancy Restrictions specified in this Agreement. (b) The Owner shall submit any other information, documents or certifications requested by the MHFA which the MHFA shall deem reasonably necessary to substantiate the Owner's continuing compliance with the provisions of the MHFA Occupancy Restrictions specified in this Agreement. SECTION 8 - ENFORCEMENT OF SECTION 42 OCCUPANCY RESTRICTIONS (a) The Owner covenants that it will not knowingly take or permit any action that would result in a violation of the requirements of Section 42 of the Code and applicable regulations of this Agreement. Moreover, Owner covenants to take any lawful action (including amendment of this Agreement as may be necessary, in the opinion of the MHFA) to comply fully with the Code and with all applicable rules, rulings, policies, procedure, regulations or other official statements promulgated or proposed by the United States Department of the Treasury, or the Internal Revenue Service, or the Department of Housing and Urban Project from time to time pertaining to Owner's obligations under Section 42 of the Code and affecting the Project. (b) The Owner acknowledges that the primary purpose for requiring compliance by the Owner with the restrictions provided in this Agreement is to assure compliance of the Project and the Owner with Section 42 of the Code and in applicable regulations, AND BY REASON THEREOF, THE OWNER IN CONSIDERATION FOR RECEIVING LOW -INCOME HOUSING CREDITS FOR THIS PROJECT HEREBY AGREES AND CONSENTS THAT THE MHFA AND ANY INDIVIDUAL WHO MEETS THE INCOME LIMITATION APPLICABLE UNDER SECTION 42 (WHETHER PROSPECTIVE, PRESENT OR FORMER OCCUPANT) SHALL BE EN IILED, FOR ANY BREACH OF THE PROVISIONS HEREOF, AND IN ADDITION TO ALL OTHER REMEDIES PROVIDED BY LAW OR IN EQUITY, TO ENFORCE 091196 F:ADATA'M 100\)Y.M100910C iM 7 SPECIFIC PERFORMANCE BY THE OWNER OF ITS OBLIGATIONS UNDER THIS AGREEMENT IN A STATE COURT OF COMPETENT JURISDIC 1 ION. The Owner hereby further specifically acknowledges that the beneficiaries of the Owner's obligations hereunder cannot be adequately compensated by monetary damages in the event of any default hereunder. (c) The Owner hereby agrees that the representations and covenants set forth herein may be relied upon by the MHFA and all persons interested in Project compliance under Section 42 of the Code and the applicable regulations. (d) The project Owner acknowledges that the MHFA is required, pursuant to Section 42(m)(1)(iii) of the Code, (i) to monitor the Project Owners and the Project's compliance with the requirements of Section 42 of the Code, and (ii) to notify the Service of any noncompliance which if found. In addition, Project Owner acknowledges that MHFA shall monitor the Project Owner's compliance with the MHFA Occupancy Restrictions, if any, set forth in Section 5 hereof. SECTION 9 - MISCELLANEOUS (a) Severabilitv. The invalidity of any clause, part or provision of this Agreement shall not affect the validity of the remaining portions thereof. (b) Notices. All notices to be given pursuant to this Agreement shall be in writing and shall be deemed given when mailed by certified or registered mail, return receipt requested, to the parties hereto at the addresses set forth below, or to such other place as a party may from time to time designate in writing. To the MHFA: To the Owner: ATTENTION: Low - Income Housing Credit Program Minnesota Housing Finance Agency 400 Sibley Street, Suite 300 St. Paul, MN 55101 A 1 LNTION: Terry 3. Schmid Cottage Homesteads of Willow Ponds Limited Partnership 101 2nd Street NW Avon, MN 56310 The MHFA and the Owner. may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent. (c) Amendment. Notwithstanding anything to the contrary contained herein, this Agreement may be amended by a written agreement between the MEIFA and the Owner, which agreement shall be effective upon execution thereof by the MHFA and the Owner and the recording/of the amendment with the County Recorder of the County in which the Project is Iocated. The Owner agrees that it will take all actions necessary to effect amendment of this Agreement as may be necessary to comply with the Code any and all applicable 091196 FIDATA'M 100VKh00091OCJM 8 rules, regulations, policies, procedures, rulings or other official statements pertaining to the Credit. (d) Subordination of Agreement. This Agreement and the restrictions hereunder are subordinate to the loan and loan documents, if any, on the Project except insofar as Section 42 requires otherwise (relating to the three -year vacancy control during the extended use period). (e) Governing Law. This Agreement shall be governed by the laws of the State of Minnesota and, where applicable, the laws of,the United States of America. (i Survival of Obligations. The obligations df the Owner as set forth herein and in the Application shall survive the allocation of the Credit and shall not be deemed to terminate or merge with the issuing of the allocation. IN WITNESS WHEREOF, the Owner has caused this Agreement to be signed by its duly authorized representatives, as of the day and year first written above. This document drafted by: R1NKE- NOONAN 400 1st Street South, Suite 700 PO Box 1497 St. Cloud, MN 56302 091196 F:\DATAV.Lf OV104Q0910CJM OWNER COTTAGE HOMESTEADS OF WILLOW PONDS LIMITED PARTNERSHIP LUMBER ONE PROPERI1IS 111, AVON INC., GENERAL PARTNER By P Name: Terry J. S Title: President 9 STATE OF MINNESOTA ) ) SS COUNTY OF S'1 EARNS ) On this /2, , day ofL5 , /em,Jef- , 1996 before me, a Notary Public within and for said County, personally appeared Terry J. Schmid, to be known, who, being duly sworn, did say that he is the president of Lumber One Properties III, Avon, Inc., the General Partner of Cottage Homesteads of Willow Ponds Limited Partnership, the limited partnership named in the foregoing instrument, and that said instrument was signed as the free act and deed, by the General Partner with the authority of said limited partnership. 046,919 Notary Publi CHERYL A. POPOWSKI NOTARY PUBLIC - MINNESOTA STEA° ^'S COUNTY p. Jan. 31, 2000 0911% F:IDATAIM 1 000KM\00910C,1M 10 LEGAL DESCRIPTION FOR WILLOW PONDS IN LINO LAKES, MN ANOKA COUNTY LOT ELEVEN (11) BLOCK ONE (1) WILLOW PONDS OF LINO LAKES 0911% P:IDATANi 100VKM00910CJM 11 • • ,1. 2a "% 11' 37,41 LumBea a C zoid l; i Z ti7631 llttPA� 012 000 OK1401, Z/10 MINNEROTA HOUSING FINANCE AGENCY LOW INCOME HOUSING TAX CREDIT PROGRAM AMENDED AND RESTATED COMMITMENT AND CARRYOVER ALLOCATION AGREEMENT WITH ELECTION OF APPLICABLE PERCENTAGE T111S AGREEMENT dated this 18th day of July 1996, h an Amendment and restatement to that certain Coanmitment/Canyove r Allocation Ajteement with election of applicable percentage dated December 28, 1994 by and between Cottage }fumtsvtteads of Willow Ponds Limited Partnership, a Minnesota Limited Partnership, wboso principal office is located at 7301 Ohms Dine, 0560, Edina, MN 55439 (hereinafter refereed to as "Owner"), and the Minnesota Haurin j Furana. Agency, a public body corporate and politic of the State of iviinrwsote, located at 400 Sibley Strout, Suite 300, Si. Paul, MN 55101 -1998 (hereinafter referred to as "MHPA "). WITNESSETH r That in consideration of the covenants herein contained, and other good and valuable consideration, further implementing and clarifying the obligations of the Owner under Minnesota Statutes, sections 462A.27.2 Subdivision 3(c)(3Xv), the parties hereto do hereby agree as of this date, but effective as of December 27, 1995, the terms and provisions of the Comatitrneat/Catryover Allocation Agreement with Election of Applicable Percentage shall be, and they hereby are, amended and =gated in.thsir entirety to provide as follows: This Agreement dated this 280t day of December, 1994, by and between Cottage Homesteads of Willow Ponds Limited Pann.rshlp, a Minnesota Limited Partnership, whose principle office is locoed at 7301 Ohms Lane, *560, Edina, MN 55439 (hereinafter reforud to as " (hwner"), and the Minnesota Housing Finance Agency, a public body corporate and politic of the State of Minnesota: located at 400 Sibley Street, Suite 300, St. Paul, MN 55101 -1998 (hereinafter Waned od to as "MHFA"). WITNESSETH: WHEREAS, Owner has applied to MHPA fora carryover allocation (`allocation ") of low-income /sousing tax credits: for the year 1994, is accordance with Section 42(hXI)(E) of the internal Revenue Code of 1986, as amended (hereinafter referred to as the "Coder"), and the provisions of the Procedural Manual for Low Income Housing Tax Credit Program of the MHFA (hereinafter referred to As the "MHFA Procedural Manual"); and WHEREAS, Owner has an interest In oral estate identified below and in Exhibit A, attached hereto and hereby made a put hereof (hereinafter referred to as the "Project "). which will contain, when placed in service, a building or buildings identified below and in Exhibit 5, attached hereto and hereby made a parr hereof, with qualified low-income housing units as damned in the Code; and WHEREAS, the Owner has provided the MHFA with * written certification from an attorney or certified public accountant that each building for which this allocation is being made is a qualified building as defined in Section 42(hX1 XE)(ii) of the Coda (that being part of *project in which the owner's basis, ax of December 31, 1994 is more than ten percent (10%) of said owner's reasonably expected basis in the project as of December 31, 1996) and that each building will be placed in service by December 31, 1996. WHEREAS, the Owner has represented and certified that as of December 31, 1994, the Owner will have a carryover - allocation bull of at least Three Hundred Thirty One Thousand One Hundred Thirty - Seven . and no/irXt Duller: ($331.137.03) in the project, representing Eleven and Thirty -Six One Hundredths of one percent (11.36%) of the reasonably eepociod basis of Two Million Nine Hundred Fourteen Thouasnd Twenty -Five and no/ NM Doltarn ($2,914,025.00) in the project WHEREAS, based upon the Owners application and the lnformatioe contained therein upon which MHFA has relied, and the authority contained in Minn. Stat. Sex. 462A.223 (1980 as amended ( hcreinafter referred to es the "P.nabting Act "), six MHFA has determined to allocate and. *object to the Low loeoeae nutmeg Tsx n.ae Ytpntan, 1 rW114 ww, ai.aioa and A a i. stir A�"'mA` EXHIBIT B SE, 4T 'BY la. 24 '96 11; 36kr't LLt1BE'r( bl e7-NUti n.:41-A7631 *VA- viz o00 gnet•a Of 10 provisions act forth below, diestafter to issue IRS Form(s) x609, in accordant* with Sec: 42 of the Code, the MHFA Proocdurai Manual anti the Enabling Act, and the Owner is waling to accept sue h an allocation. NOW, THEIMFORE, in consideration of the covenants herein contained and the mutual benefits } to be derived therefrom, h is hereby agreed its foliawa: 1. MHFA hereby agrees to sat aside end thereafter allocate the low - income housing credit dollar amount for the Project In the amount of Two Hundred Forty -Six Thousand Fire Hundred Sixty and no/100 boilers (5246,560.00), subject to Owner's compliance with the provisions 'Of the MHFA Procedural Manual, Se. 42 of the Code, the contadotu contained hate, and final evaluation by MHFA when the buildings are placed in service. In making the afocation contained herein, MHPA has relied solely upon the intorrnation supplied by Owner in its application, and neither has nor will make an independent investigation of the facts masted therein. The MIWA hereby ataume.% no risk err liability and makes no repre..sentatiora concerning, or guarantees that Owner wilt be eligible to arrive the credit stated and reserved herein, such determination rt sdng with the bucmal Revenue Service, 2. Owner hereby agrees to accept the tow- htoomc housing credit dollar amount as stated above as the maximum amount to be allocated for the Project listed below: Owner: Owner's Taxpayer LD. No.: Project Name: MHFA Development No Cortege Homesteads 730 Lane, #SefWillow Ponds l.itnited Pattnrrship Bdina, MN 55439 Pending Cottage Homesteads of Willow Ponds Elm Street & Sunrise Drive Lino Lakes, MN 35014 94 -120 3. Owner agrees to submit all rvquirnd documentation to MHFA in accordance With Sec. 42 or the Code and the MIWA Pracvdttral Manual no later then December 31, 1 996 to raxive a 1994 Low - income Housing Credit Allocation Certification Fort 8609. 4. L if this box Is checked, the owner hereby irrevoc:ttbty elects, pursuant to Section 42(b)(2)(A)(ii)(I) of the Code. to fix the applicable credit percentages) for the project as the percentage-4/ prescribed by the Secretary of the Treasury for the month of December, 1994, which is the month of this ' over Allocation. If this box is checked, the owner has irrevocably elected to use the Tax' Credit percentage az the time the building is placed in service. 5. Rogardles of when the Projtx:t is pieced in service. the actual credit amount will be basted on the MHFA final evaluation and the applicable federal percentage rate net forth in paragraph 4, above, not to racrfd the total amount in paragraph 1. above. 6. If the actual credit amount based upon the MHPA final evaluation la has than the total amount in paragraph 1 above, the unallocated credit amount will be returned to the state credit ceiling for reallocation. 7. Ax condition precedent to issuing the credit hereunder, each of the following shall be delivered to MHFA in form and substance satisfactory to the MHFA: A. Copy of Certificate of Occupancy provided by local governmentat authority having jurisdiction. B If not surety provided, current utility allowance schedule. For PmHA financed projects, final approved copy of FmHA utility allowance for each bedroom size (Instructions 1944E, Exhibit A -5). C. Cost certification by C.P.A. (MHFA soma L1HC -9). D. Updated application (MHFA Form LlHC -1). Law tern*. }teacup Tax Credit Pro Coomihn at wd Ca move AUoortl With amok* or Aitiotlis thnvaat 2 10194 • 3 fr''rd( JtU. GJ '9b 11 3814-1 LUMBER C1$ fnK)t {n' iig7631 t112 O+'•1 ,i ♦ /le E. Evidence of transfer of ownership of development to the owner for developmenu stceivinj acquisition credit. P. Written statement from owner than they will utilize public housing waiting list(%) identifying nitro and address of appropriate public housing authority, iedicnting how the owner will utilize the waiting lists. • 0. Documentation of the antrum and disposition of reserver, contingencies, end any trlob savings. If the abovo revert back to developer /owner, general partner or way owncnhip interest. the MHFA will consider tinese as deferred developer feat, end for purposes of tax credit allocation, restrict the developer fees as spceifled in tho Procedural Manual. H. Recorded oopy of MHPA approved Declaration of Land Use Restrictive Covenant for Low Income Housing Credits. Do not record prior to MHFA review. T. A copy of the Election of Gross Rent if the owner wishes to elect to determine the gross runt floor on the due the building is phlox! in service pursuant to Rev. Proc.94 -57. (Please not that the original Election form must be received by MIWA for each building before that bvildh g is pieced in service if no Election of Gross Rent Form in received, the gross rent floor will be determined as of December 31. 1994.). . Copies of any waivers required by Section 42 obtained from I.R.S. K. Copies of find Syndication Agrcc>Taenu disclosing terms and conditions. , L. Original Owner Certification (MIIFA Form LSHC-3) concerning the placed in service date as defined in Section 42. M. Copies of final documents of all sources of tirade (loans, grams etc.) disclosing sit terms end condition including copies of executed originals of all loan or grant notes and mortgages. N. Final amount of premmils or rooelpu expected to be generated by the tax credits. O. Final 15 year after tax cash flow pro forma (for five or morn units). P . Such documents and instruments as see necessary and as may be required by MHFA. Q. Nonrefundable aflotauion fee of five percent (5%) of annual tax credit 'amount, if not already paid at carryover application. R. The project is mutant in the payment of compliance monitoring fees. S. Cuunsnt rent roll. T. Annual Owner's Certification (MHFA Form LUHC -12) for each calendar year beginning with the year the pmect was placed in service. U. Annual Compliance Report (MHFA Form LIHC -13) for each calendar year beginning with the your the project was placed in service. S. This allocation may be canceled and returned to the state credit ceiling for reallocation by mutual consent of the panics hereto and also is subject to cancellation at the sole discretion of the MHFA if the Owner fails to comply with the project schedule described in Exhibit E, as applicable. or the additional or specie/ conditions of the aitocation described in Exhibit C or the letter which established tho trot credit r+e+ scrvazion. 9. `The Owner agrees that for rhis Agreement to be valid. it must be properly signed, notarized, and in the office of the MHFA no later than the last business day of the month set forth in par. 4, shove. 10. Owner and MHFA agree that this Agreement shall be binding on all successors in interest to the undersigned taxpaycdOwner, and all successors in interest to the Owner or Owners of the Project. I I. Additional or Special Conditions. This Commitment is subject to the additional or special conditions which are listed below: ((f none. so state.) See Exhibit C attached hereto and hereby Mule a part hereof. Cm REMAINING PORTION OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.) 1.,mv loom. Ho inn Tax c:,.dat Prop= 3 1Offs ColuaatWora .eJ Conyew Altor.snoa Ague ac With E>.ctton of Appt c ba. rotst trjc By.tu, ea '96 11: 3941 LU18CR £ fivzi itZ3567631 Acknowledged, specri and OWNER r STATE OF COUNTY OF tr�fA� 012, 35 i ;It 5/10 COTTAGE IJOMSTEADS OF WILLOW PONDS, L.P. a Minnesota Limited PsrAlesship By; ILA/ d- .lam Pte. ye t �1 d((4 V4 L.r>,rlec yypod or ?tinted Name /Ix 4? is/ 4t /e4- tfn✓f�c Dated alt 17 I if '? ti Subscribed and sworn to before me, x notary public, this a1, dayeof 19 Zr z, by c� )` of d ,: .•'^ `.fir omesteads of Willow Ponds Limitc+d Partnership, a Minnesota Limited Partnership, on behalf of said partnership. STATE OF MINNESOTA } ) COUNTY OF RAMSEY ) Notary Public ' MINNESOTA SOUSING FINANCE AGENCY a public body corporate and politic of the Steve of hiinomoot Its: C_eirnxrit:Y41A+r1t"1�` MHI7A Federal Tart I.D. No. 41. 1599130 Dated: •la1• 3r1 Ocilla Tbc foregoing instrument was acknowledged before me thlsv�,3* day of .1.6 4 i 9a6 by K •S7 tiq d l sl C c,►M wtL l n,n ry. of the Minneenta. Housing Finance Aggricy, a public body corporate and politic of the State of I4inne eta, on behalf of said agency . This instrument was drifted by: Minnoaout Housing Finance Agency 400 Slbioy Strcct, SUito 300 St, Paul. MN 55101-3948 Low botont lioaiNg Cr.* Pm v+u comaguwrw - CaiRy+Mt Ally nt143 Ainmuswil WW1 t4.eaoa of AppticWl. suocatig ublic 's � apses ismcluc tstn DAR[71A cCU' Iq GOrMMm■ WW1 "WWII 7184 10094 • sec a JU_ 24 '96 11 :4041 LitlEsER Ofd won 6f2S67631 EXHIBIT A LEGAL DESCRIPTION Mirk. 812 Mb ?.11a, 0,10 That part or the Bast One -Half of the Southwest Quarter of the Southwest Quanar, of Section 18. Township 31, Range 22, Anoka County. Minnesota. lying Southerly of tits Southerly line of that property Oacquired by the State of Minnesota under a warranty deed recorded with the Anoka County Recoc or`R ffice to Document Number 272877: AND That put of to West One -Half of the Southwest Quarter of the Southwest. Quarter, ,of Section 18. Township 31, Range 22, Anoka County, MinAesma. lying Southerly of the Southerly line of that prppeety tied by the State of Minnesota under a warranty deed rocortkd with the Anoka Ooon+ty Recorder`s as Document Number 272874: AND That pan of the West One -Half of the West Ow-Hallo( the Southwest Quarter of the SAouthwest Quarter of Section 18. Township 31, Range 22, anora County , Minnesota, lying Southerly of the Southerly line of that property acquired by the State of Minnesota under a warranty decd recorded with the Maki County Recordcs't Office as Document Number 287285; LAM teuaoc Hawing Tar Chas hors Ceatatmuec And Carryover Abkwtko Apzwacat wigs rkwor at Appllah■ leraettjs 5 ' 1 0/94 • By Iu- za '96 11:aeAn l_ttat3ER Mr.! 14"3567631 EXHIBIT EPA-. 612 356 mi ; t 7/15 Willow Ponds, Lino Lakes. MN. mum +194.120 and Type Desk `un Elm • Sunrise Lino Lake, MN (New ConsttuCtion) December 1995 MAE44 -40020 Liao Um, MN (New Constnlc on) l nber 1995 MN-94 -40021 Elm IR sunrise Lino Lakes, MN (New Curun anioq) December 1995 MN -94 -90022 Uno Lakes, MN (Plow Construction) December 1995 14434- 94 -40Q23 _ Low roam.. Nema g Ti L?dk hopes d 1044 Commitment and Crryew[ Altoo♦tkm Amt MA Mama et Appllmak l+raatap. S2 NT 6Y:su 2.1 '96 ! I 404t1 LJ.J R S1t e„..evQri Et 1, 3567631 • ktioa- 612 666 pg.76 :s to to mon' C ADDITIONAL OR SPECIAL CONDITIONS This Agreement Is contingent upon the following: 1. The Owner has repassemed to MHPA In the MHFA Porto L1HC -10 that it will impose the fol owing additional restrictions: a, The Project shall rent sl least 50% of the units to persona with mental illness, mental retardation, brain injury, drug dept donry, developmental disabilities, or physical disabIlitiea and shall obtain a commitment from a public or privals social services agency to provide services consistent with applicable date licensing requirements for the services. b. The qualified basin a reduced to bring toe nlanist s .> fir...cnutierdst'.IL o+'crhd. p a osal_aket fecal within MFiFA guldclInes. 2. MHFA's receipt of prior to January 31, 1995, the following: A. An updated Application (MNFA Form I.INC.1) which reflects at least 5096 of the units (24) will be rented to persons with physical disabliitiea. Lbw limos* H.walsa Tax Cledf hymns trusts Csentramis a WM Bkasa. or i A Arsn.ur ADDENDUM TO EXHIBIT C TO COMMITMENT/CARRYOVER ALLOCATION AGREEMENT I. SPECIAL CONDI'T'IONS. Paragraph 1(a) of Exhibit C of this Combination Commitment and Carryover Allocation Agreement, dated December 28, 1994, is deleted and replaced with the following provisions. This Agreement is contingent upon the following: Restriction. At least fifty percent (50 %) of the Project units shall be accessible as provided under Minnesota Rules, chapter 1340 and at least twenty -four of the Project units shall be set aside and rented to persons with physical disabilities. For purposes of this Exhibit C, the provisions set forth in this Addendum shall be referred to as the 'Restriction." II. DEFINTIIONS. A. Definition of "Physically Disabled." For purposes of the Restriction, the term "Physically Disabled" shall mean as follows: 1. General Rule. A person who is Physically Disabled within the meaning of the Americans with Disability Act (the "ADA "), 42 U.S.C. § 12102(2), and the regulations promulgated thereunder, including 29 C.F.R. § 1630.2(g), and such physical disability is permanent. a. Statutory Definition. Under the ADA, a person is Physically Disabled if he or she has a physical impairment that substantially limits one or more of the major life activities of such individual. 42 U.S.C. § 12102(2).__ b. Definition of Physical Impairment. A physical impairment means any physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the following body systems: neurological, musculoskeletal, special sense organs, respiratory (including speech organs), cardiovascular, reproductive, digestive, genito- urinary, hernic and lymphatic, skin, and endocrine. 29 C.F.R. § I630.2(h). 2• Supplemental Standard. A person shall also be considered "Physically Disabled" for purposes of the Restriction if the person is "a physically disabled person" within the meaning of Minn. Stat. § 169.345, Subd. 2, and such physical disability is permanent. C -1 B. Definition of "Disabled Individual." For purposes of the Restriction, the term .. "Disabled Individual" shall be an individual who is Physically Disabled. C. Definition of Special Needs Units. For purposes of the Restriction, a "Special Needs Unit" shall mean a residential unit in the Project which is constructed, designated and maintained as provided under this Restriction. D. Definition of Pre - Leasing. For purposes of the Restriction, "Pre- Leasing" shall mean the Owner's marketing and rental activities prior to the time when all Project units have received certificates of occupancy from the appropriate governmental entities. E. Definition of Initial Occupancy. For purposes of this Restriction, the term "Initial Occupancy" shall mean the first occupancy of a Project unit following the issuance of the certificate of occupancy for such unit by the appropriate governmental entities. F. Definition of Subsequent Vacancy. For purposes of this Restriction, the term "Subsequent Vacancy" shall mean any vacancy of a Project Unit following the termination of an Initial Occupancy of a Project Unit. III. RENTAL OF SPECIAL NEEDS UNITS. The Special Needs Units shall be specifically designated and set aside and rented to individuals who have combined incornes of sixty percent or less of the area median gross income, and include at least one individual who is Physically Disabled. The Owner has no obligation to rent Special Needs Units to or give priority consideration to individuals having the characteristics set forth in Minn. Stat. § 462A.222, Subd. 3(c)(3), clauses (i) through (iv). The Owner may not however, refuse to rent to individuals having those characteristics solely because of those characteristics. IV. DETERMINATION OF DISABLED INDIVIDUAL. An applicant for a Special Needs Unit must present one of the following sets of documents in support of his or her application for a Special Needs Unit: A. Physician or Chiropractor's Statement. A statement signed by a licensed physician or chiropractor in which he or she certifies that the applicant is a Physically Disabled Person as defined herein and that such disability is expected to be permanent. B. Minnesota Public Safety Certificate. A photocopy of the certificate issued by the Minnesota Depaituient of Public Safety, Division of Driver and Vehicle Services for persons with permanent disabilities pursuant to Minn. Stat. § 169.345, Subd. 3, and a copy of the physician or chiropractor's statement in which he or she certifies that the applicant is Physically Disabled within the meaning of Minn. Stat. § 169.345, Subd. 2 and such physical disability is permanent. 291012.4 C -2 area, contacts with senior citizens groups and the Minnesota Council for Independent Living and other forms of advertising. The Owner shall also utilize the public housing waiting lists maintained by the Metropolitan Council Housing and Redevelopment. Authority and the Lino Lakes Housing and Redevelopment Authority. Finally, the Owner shall also establish and maintain a separate waiting list for the Special Needs Units. 4. Failure to Rent Special Needs Units to Disabled Individuals. a. Documentation of Rental Activities. The Owner shall contemporaneously document all attempts made to rent such Special Needs Units to a Disabled Individual and the Owner shall certify in writing to the META the reasonable steps that have been taken to rent the Special Needs Units to Disabled Individuals at the time it applies for the issuance of I.R.S. Forms 8609. b. Rental to Non - Disabled Individuals. In the event the Owner has been unable to rent all of the Special Needs Units within the time frame set forth in Section VIC? and the Owner has complied with the documentation requirements set forth in Section VI.C.4.a., the Owner may rent any vacant Special Needs Units to tenants who do not include a Disabled Individual. c. Continued Classification as Special Needs Unit. In the event a Special Needs Unit is rented to tenants who do not include a Disabled Individual after the Owner has complied with the requirements of Section VI.C.4.a. and b., such Special Needs Unit shall continue to be treated as in compliance with this Restriction and eligible for the low- income housing tax credits, (provided, however, that such tenants meet the income requirements set forth in Section 42 of the Internal Revenue Code of 1986, as amended.) 5. Subsequent Vacancy. When a Special Needs Unit which has been rented to tenants who do not include a Disabled Individual subsequently becomes vacant, the Owner shall first be required to take all Reasonable Steps to rent that Special Needs Unit to a Disabled Individual as set forth below. D. Subsequent Vacancies. 1. Treatment of Vacant Special Needs Unit. When a Special Needs Unit subsequently becomes vacant after Initial Occupancy, the Special Needs Unit shall continue to be treated as a Special Needs Unit and in compliance with the Restriction while vacant if Reasonable Steps are being made to rent the Special Needs Unit to a Disabled Individual. C -4 2. Reasonable Steps. For these purposes, "Reasonable Steps" shall include: the maintenance of a waiting list for the Special Needs Units, contacting individuals on the waiting list, the posting of notices on the Project premises, advertisements for a minimum of a two (2) month period in the St. Paul Pioneer Press and Quad Community Press posting circulars at the Lino Lakes Senior Citizens Center and the Project, forwarding circulars to senior citizen groups serving the Lino Lakes community and the Minnesota Council for Independent Living, and utilizing the public housing waiting lists maintained by the Metropolitan Council Housing and Redevelopment Authority and the Lino Lakes Housing and Redevelopment Authority. The Owner shall immediately commence such Reasonable Steps upon its receipt of a tenant's notice to vacate a Special Needs Unit. 3. Failure to a Rent Special Needs Unit to Disabled Individual. In the event the Owner is unable to rent a Special Needs Unit to a Disabled Individual within four (4) months after the actual vacancy of a Special Needs Unit and the Owner has contemporaneously documented all attempts made to rent the vacated Special Needs Unit to a Disabled Individual, the Owner may rent the vacated Special Needs Unit to tenants who do not include a Disabled Individual. 4. Treatment of Special Needs Unit. If all requirements set forth in this section have been satisfied, a Special Needs Unit shall continue to be treated as in compliance with the Restriction and eligible for the low- income housing tax credit, notwithstanding the Owner's rental of the Special Needs Unit to tenants who do not include a Disabled Individual. When a Special Needs Unit becomes vacant once again, the Owner must once again take Reasonable Steps to rent the Special Needs Unit to a Disabled Individual before renting it to tenants who do not include a Disabled Individual. E. Termination of Lease of Special Needs Unit to Non - Disabled Individuals. I. End of First Lease Term. In the event the Owner has rented a Special Needs Unit to tenants who do not include a Disabled Individual pursuant to Sections VI.C.4.b. or VI.D.3., such tenants shall be required to vacate the Special Needs Unit and will have the option to move to a Project unit which is not a Special Needs Unit at the end of the first lease term, if the following conditions are met: a. A vacant non - Special Needs Unit is available for occupancy at the end of such lease term; and, b. The Owner has contacted a Disabled Individual on its waiting list and that Disabled Individual will be able to occupy the Special Needs Unit at the end of such lease term. '. Renewal Leases. After the end of the first lease term, tenants who do not include a Disabled Individual will be required under any renewal agreement to C -5 vacate a Special Needs Unit and will have the option to move to a Project Unit which is not a Special Needs Unit during the renewal term upon the receipt of thirty (30) days written notice from the Owner in the event: a. A vacant non - Special Needs Unit is available for occupancy at the end of the thirty (30) day notice period; and b. A Disabled Individual will be able to occupy the Special Needs Unit at the end of the thirty (30) day notice period. F. Change in Status of Disabled Individual. A unit shall continue to remain a Special Needs Unit in compliance with the Restriction and eligible for the low- income housing tax credit in the event a Disabled Individual no longer meets the definition of Physically Disabled. 1. End of First Lease Term. The non - qualifying tenant (and any other tenants of such Special Needs Unit) will be required to move to a Project unit which is not a Special Needs Unit at the end of the applicable lease term, if the following conditions are met: a. A vacant non - Special Needs Unit is available for occupancy at the end of such lease term; and b. The Owner has contacted a Disabled Individual on its waiting list and that Disabled Individual is able to occupy the Special Needs Unit at the end of such lease term. 2. Renewal Leases. After the end of the first lease term, non - qualifying tenants will be required under any renewal agreement to vacate a Special Needs Unit and will have the option to move to a Project Unit which is not a Special Needs Unit during the renewal term upon the receipt of thirty (30) days written notice from the Owner in the event: a. A vacant non - Special Needs Unit is available for occupancy at the end of the thirty (30) day notice period; and b. A Disabled Individual will be able to occupy the Special Needs Unit at the end of the thirty (30) day notice period. VII. OWNER CERTIFICATION OF RESTRICTIONS. A. Issuance of the I.R.S. Forms 3609's. In connection with its application for the issuance of the appropriate I.R.S. Form 8609's, the Owner shall submit the following additional information to the MHFA: C -6 1. A written certificate of the Owner and the Project Architect that at least 50% of the Project units constitute "Special Needs Units" together with plans and specifications in support of that certificate. 2 A written certificate of the Owner in which it sets forth the number of Special Needs Units that have been rented to Disabled Individuals as of the date of the application. At the request of the MHFA, the Owner shall also furnish copies of relevant individual certification documents. 3. In the event all of the Special Needs Units have not been rented to Disabled Individuals, a written certificate of the Managing General Partner in which it sets forth in detail the steps the Owner has taken to market such units to Disabled Individuals. B. Annual Certification. 1. Certification of Disabled Individual. At the same time the Owner obtains the annual income certification from each tenant of the Project as required under Section 42 of the Internal Revenue Code of 1986, as amended, the Owner shall also obtain a certification from tenants who are Disabled Individuals concerning their current physical condition. The Owner shall maintain such certification on -site and shall permit, during normal business hours and upon reasonable notice, any books and records of the Owner regarding the Project with respect to the physical condition of the tenants which pertain to compliance with the Restriction. The Owner shall submit any other information, documents or certifications requested by the MHFA which the MHFA shall deem reasonably necessary to substantiate the Owner's continuing compliance with the provisions of this Restriction. 2. Certification to the MHFA. As part of and in addition to its annual certification as required under Treas. Reg. § 1.42 -5(c), the Owner must certify at least annually to the MHFA that for the preceding 12 -month period: a. The Project met the requirements of this Restriction. b. The Owner has received an annual certification from each Disabled Individual who is a tenant and documentation to support that certification; c. At least 50% of the Project units are Special Needs Units; and d. In the event a Special Needs Unit is not occupied by a Disabled Individual that Reasonable Steps were or are being made to rent that unit to tenants who include a Disabled Individual. VIII. NON - COMPLIANCE AND CORRECTION PERIOD. A. Noncompliance Notification. The MHFA will promptly provide written notice (the "Noncompliance Notification ") to the Owner if the MHFA does not receive the certification and supporting documentation required pursuant to Section VIII, B or does not receive or is not permitted to inspect the tenant certifications, supporting documentation and rent records or discovers by inspection, review or in some other manner, that the Project is not in compliance with the provisions of this Restriction. B. Correction Period. In the event the Owner receives a Noncompliance Notification as described above, the Owner shall have a period of time not to exceed 90 days from the date of the Noncompliance Notification during which the Owner must supply any missing certifications and bring the Project into compliance with this Restriction (the "Correction Period "). The MHFA may extend the Correction Period for up to six (6) months but only if the MHFA determines there is good cause for granting the extension. IX. TERM OF RESTRICTION. The term of this Agreement shall be effective as of December 28, 1994 and shall terminate at the end of the term of the extended use agreement to be entered into by the Owner and the MHFA pursuant to Section 42(h)(6) of the Internal Revenue Code of 1986, as amended. X. AIY ENDMENT OF RESTRIC ELON. The parties agree that they will take all actions necessary to effect amendment of this Restriction as may be necessary in order to comply with the Code, any and all applicable rules, regulations, policies, procedures, rulings or other official statements pertaining to the low - income housing tax credit or pertaining to the implementation. of the Restriction itself. C -8 • ■• t■ NO ■■ Minnesota Housung Finance Agency HOUSING TAX CREDIT PROGRAM COMPLIANCE MANUAL Minnesota Housing finances and advances affordable housing opportunities for lownr'id moderate Income Minnesotans to enhance quality of rife and foster strong communities. • The Minnesota Housing Finance Agency does not discriminate on the basis of race, color, creed, national origin, sex, religion, marital status, status with regard to public assistance, disability familial status, or sexual or affectional orientation in the provision of services. Minnesota Housing is an equal opportunity employer. This information will be made available in alternative format upon request. BACK TO TOP INTRODUCTION 1 FOREWORD 2 BACKGROUND AND OVERVIEW 3 PROJECTS WITH ALLOCATIONS FROM MULTIPLE ALLOCATORS 3 TAX EXEMPT BOND PROJECTS 3 CHAPTER 1- PROGRAM SUMMARY 4 A. MINIMUM SET ASIDE ELECTION 4 B. RENT AND INCOME REQUIREMENTS 5 C. RENT AND INCOME FIGURES 5 D. BUILDING REGULATIONS 6 E. FULL TIME RESIDENT MANAGER'S UNIT 7 F. CALCULATING THE FIRST YEAR APPLICABLE FRACTION 8 G. QUALIFIED BASIS 9 H. CLAIMING CREDITS 9 I. COMPLIANCE PERIOD 10 J. OUTLINE OF MINNESOTA HOUSING COMPLIANCE PROCESS 10 K. OWNER'S RESPONSIBILITY 11 L. NONCOMPLIANCE 11 CHAPTER 2 - IRS REPORTING REQUIREMENTS 12 A. Low INCOME HOUSING ALLOCATION CERTIFICATION (IRS FORM 8609) 12 B. LOW INCOME HOUSING CREDIT (IRS FORM 8586) 12 C. DECLARATION OF LAND USE RESTRICTIVE COVENANTS 13 D. RECAPTURE OF Low INCOME HOUSING CREDIT FORM 8611 13 CHAPTER 3 - RECORD KEEPING AND RECORD RETENTION REQUIREMENTS 14 A. RECORD KEEPING 14 B. RECORD RETENTION 14 CHAPTER 4 - MONITORING - CERTIFICATION AND REVIEW 16 A. ANNUAL CERTIFICATION 16 B. ANNUAL SUBMISSION REQUIREMENTS 17 C. COMPLIANCE MONITORING REVIEW REQUIREMENTS 19 D. PROCEDURE FOR COMPLIANCE INSPECTION 20 E. COMPLIANCE FORMS 22 F. CORRECTIONS TO DOCUMENTS 22 G. ANNUAL MONITORING FEES 23 H. MINNESOTA HOUSING RECORDS RETENTION 23 I. LIABILITY 23 CHAPTER 5 - PROJECT RENTAL REQUIREMENTS 24 A. ALLOWABLE FEES AND CHARGES 24 B. SECTION 8 RENTS 25 C. MINIMUM LEASE REQUIREMENT 25 D. HOUSEHOLD SIZE 26 E. UTILITY ALLOWANCE 28 F. OWNER'S AVERAGE OF ACTUAL CONSUMPTION UTILITY ALLOWANCE PROCEDURES 30 G. PHYSICAL REQUIREMENTS OF QUALIFIED UNITS, SUITABLE FOR OCCUPANCY 33 H. DISCRIMINATION PROHIBITED IN PROJECT AND GENERAL PUBLIC USE 33 I. VACANT UNITS 34 J. OTHER STIPULATIONS 35 K. STUDENT ELIGIBILITY 35 L. LOSS OF ELIGIBILITY UPON BECOMING A FULL -TIME STUDENT 36 M. UNIT TRANSFERS 37 CHAPTER 6 — INCOME DETERMINATIONS 38 A. INCOME CERTIFICATION/RECERTIFICATION 38 1. Initial Eligibility Determination 39 2. Special instructions for newly placed in service properties with existing residents 40 3. Annual Recertification 40 4. Change in Household Composition 42 5. Available Unit Rule 43 B. TENANT INCOME CERTIFICATION (HTC 14) 44 C. GOVERNMENT DATA PRACTICES ACT DISCLOSURE STATEMENT 44 D. MISCELLANEOUS FORMS TO VERIFY INCOME 45 E. ANNUALIZED INCOME 46 F. ANNUAL INCOME 47 G. EXCLUSIONS FROM ANNUAL INCOME 52 H. INCOME EXCLUDED BY FEDERAL STATUTE: 54 I. INCOME FROM ASSETS 55 J. HOUSEHOLD ASSETS Do NOT INCLUDE 58 K. ASSETS OWNED JOINTLY 58 L. INSTRUCTIONS FOR VALUING ASSETS 59 M. EXAMPLE OF CALCULATING INCOME FROM ASSETS 59 N. GENERAL INCOME VERIFICATION REQUIREMENTS 60 O. EFFECTIVE TERM OF VERIFICATION 61 P. DATE STAMP 61 CHAPTER 7 — SALE, TRANSFER OR DISPOSITION OF THE PROJECT AFTER THE PLACED -IN- SERVICE DATE 62 CHAPTER 8 — CORRECTION AND CONSEQUENCES OF NON - COMPLIANCE 63 A. NOTICE TO OWNER 63 B. CORRECTION PERIOD 63 C. NOTICE TO INTERNAL REVENUE SERVICE 63 D. RECAPTURE OF CREDIT 64 CHAPTER 9 — COMPLIANCE & MONITORING AFTER YEAR 15 66 BACKGROUND 66 A. COMPLIANCE PERIOD 66 B. EXTENDED USE PERIOD 67 C. TENANT ELIGIBILITY CRITERIA DURING THE EXTENDED USE PERIOD 68 D. MONITORING COMPLIANCE DURING THE EXTENDED USE PERIOD 69 E. CONSEQUENCES OF NONCOMPLIANCE DURING THE EXTENDED USE PERIOD 71 Index 3. Unit Transfers. Unit transfers from building to building are allowed without triggering noncompliance regardless of the multiple - building election or whether a household's income is over the applicable limit at the time of transfer. 4. Available Unit Rule. The available unit rule is revised to provide that if a household's income goes over 140% of the applicable income limit, a currently vacant unit or the next unit in the same building must be rented to a qualifying household (the "comparable or smaller" requirement no longer applies). This is essentially a one - for -one unit replacement. 5. Applicable Fraction. Only the unit fraction will be examined to determine a building's applicable fraction. 6. Rent Limits. Rent limits as elected by the owner at the time of allocation continue to be in force during the Extended Use Period. Owners of properties that were awarded selection points for additional rent restrictions should refer to the respective Qualified Allocation Plan or Declaration to determine whether those additional rent restrictions are time - limited or if they are in effect for the full term of the Extended Use Period. 7. Utility Allowances. Utility Allowances must continue to be updated annually. Revised utility allowances must be implemented within 90 days of their published effective date. Minnesota Housing will continue to update the Housing Tax Credit Program income and rent limits published by HUD annually. D. Monitoring Compliance During the Extended Use Period The following is the monitoring procedure Minnesota Housing will follow during the Extended Use Period: 1. Annual Certification. By February 15, or the next business day, Minnesota Housing will require all owners to submit an annual certification of compliance. The Owner's Certification of Compliance During the Extended Use Period, form HTC 12(Y15), contains agency- defined certification language pursuant to the terms of the Declaration. 2. Annual Reporting. The Tax Credit Summary Report (HTC 13) and related Applicable Fraction Summary must be submitted to Minnesota Housing annually along with the HTC 12(Y15), but owners are not required to report on student status. 3. Inspections. Every five years, Minnesota Housing will perform a physical inspection of the property and review of tenant files and other pertinent documentation. The first review in the Extended Use Period will be five years from the last inspection conducted during the Compliance Period. A minimum of 3 low- income units chosen at random, or maximum of 10% of the low - income units not to exceed 15 units in any development will be inspected. If the first 3 units pass inspection, then no additional units need to be inspected. Different units may be chosen for the file review as those receiving a physical inspection. Minnesota Housing Tax Credit compliance staff will continue to work with other inspection entities such as local inspection officials, other government agencies, Minnesota Housing staff etc., 69 I Minnesota Housing - Housing Tax Credit Compliance Manual 01/2010 Index • • to share inspection information. Also, we will accept HRA HQS inspections done in the same year as our review. If inspected by Minnesota Housing Tax Credit Compliance staff, inspection will be pursuant to Uniform Physical Conditions Standards. Minnesota Housing reserves the right to conduct a review of any building after serving appropriate notice and to examine all records pertaining to rental of tax credit units. Minnesota Housing may perform a review at least through the end of the Extended Use Period of the buildings in the project. 4. Annual Monitoring Fees. The amount of annual compliance monitoring fees is $15 per unit since inspections are less frequent and are done on a smaller number of units. The agency reserves the right to adjust the fee due to changing circumstances. Fees are due at the same time as the Annual Certification and Summary Report. 5. Properties with HUD or Rural Development. No Housing Tax Credit inspections or fees will be required for properties with project -based Section 8, Rural Development or other HUD programs since these properties are already subject to inspections and consequences under those programs are in place. Owners will only be required to submit the Owner's Certification of Continued Monitoring of Federal Program (HTC 12(Y15A)), indicating whether or not the property is subject to monitoring for such federal programs and identifying the date of the most recent inspection review. This certification is due on February 15th or the next business day. If a property is no longer subject to monitoring for HUD and /or Rural Development programs, then the property must be placed back on the Housing Tax Credit monitoring schedule. If the development is placed back on the Housing Tax Credit monitoring schedule, Minnesota Housing will resume all compliance monitoring activities, including charging a fee for monitoring. The timing of the next review will be based on the last inspection conducted by Rural Development, HUD or its Contract Administrator. 6. Transfer of Ownership or Ownership Interest. A transfer agreement is required in the event of a transfer of ownership or ownership interest. Such transfer agreement will put the new owner or partner on notice that it is subject to the terms of the Declaration including all compliance restrictions and annual compliance monitoring. Documentation of signatory authorization for the new owner or partner may be requested. Owners contemplating transfers of ownership or ownership interest should notify Minnesota Housing and request a copy of the appropriate transfer agreement. 7. Expiration or Termination of Extended Use Period. During the 3 -year period after the Declaration has expired or terminated pursuant to IRC Section 42(h)(6)(E)(ii), owners are required to annually submit the HTC 13 listing all low- income households that occupied a unit at the end of the term of the Declaration, the respective tenant -paid rent, utility allowance, and move -out date, if applicable, along with a certification that no low- income residents have been evicted or displaced for other than good cause. This report and certification will be due on February 15th or the next business day. No Minnesota Housing - Housing Tax Credit Compliance Manual 170 ■1 ■■ .... Minnesota Housing Finance Agency HOUSING TAX CREDIT PROGRAM QUALIFIED CONTRACT PROCESS GUIDE 400 Sibley Street, Suite 300, St. Paul, Minnesota 55101 -1998 INTRODUCTION The purpose of the Minnesota Housing Finance Agency (MHFA) is to ensure the availability of decent, safe, energy efficient, and affordable housing to low and moderate - income households. In order to achieve its purpose, MHFA is active in: lending and financing, allocating housing grants and subsidies, advocating for affordable housing, establishing state housing policies and providing technical assistance to housing sponsors. Minnesota has allocated tax credits since shortly after the Low Income Housing Tax Credit Program was created in 1986. The Minnesota Housing Finance Agency has been designated by the Minnesota Legislature as the primary apportionment Agency of Housing Tax Credits in Minnesota. Qualified local cities and counties have also been designated by the Legislature as suballocators of the tax credit: the cities of Duluth, Rochester, St. Cloud, St. Paul and Minneapolis, and Washington County and Dakota County. The initial compliance period for a development receiving an allocation of Housing Tax Credits (HTC) is fifteen years. For HTC allocations made in 1990 and later, an extended use agreement required by Internal Revenue Code Section 42(h)(6) extends the compliance period up to a minimum of fifteen additional years. Section 42(h)(6)(E)(i)(II) of the Internal Revenue Code provides that the extended use period shall terminate if a housing credit agency is unable to present a qualified contract to a taxpayer who has requested such a contract. The Internal Revenue Code (Code) contains some of the basic provisions for handling qualified contract requests. However, there are a number of important questions that have not been answered through federal regulation or other guidance. The purpose of this guide is to set forth the procedures to be followed by MHFA and the owners of Minnesota tax credit developments who are considering making a request for a qualified contract. The provisions provided in the Code are subject to modification and clarification by the Internal Revenue Service (IRS). MHFA reserves the right to revise this Qualified Contract Procedure Guide from time to time. Compliance with the requirements of Section 42 is the responsibility of the owner of the building for which the credit is allowable. The Request for a QC is a difficult process, involving substantial time and energy on the part of the owner, management company and MHFA. As such, it may not be the best alternative in each situation and owners are encouraged to consider all options. An important aspect in making this decision is that after the Compliance Period, MHFA has adopted policies that reduce compliance and redefine some of the eligibility criteria Housing Tax Credit Program 1 Qualified Contract Process Guide (rev.12 /05) • • • (please refer to Chapter 9 of the Tax Credit Compliance Manual). As a result, compliance can be achieved much easier, but the spirit of the program is not compromised and the housing will continue to serve the people for whom the program was intended. With this in mind, it is hoped that many owners would choose to continue the development under the existing restrictions throughout the Extended Use Period. Alternatively, the owner may sell the development outside of the QC process. In this instance the purchaser would continue to operate the property with the HTC restrictions on the property under the reduced compliance requirements referenced above. FOREWORD The Minnesota Housing Finance Agency (MHFA) shall be under no obligation to undertake an investigation of the accuracy of the information submitted for Qualified Contract Presentation. MIA's review shall not constitute a warranty of the accuracy of the information, nor of the quality or marketability of the housing to be purchased, constructed, or rehabilitated pursuant to the program. Developers, potential investors and interested parties should undertake their own independent evaluation of the feasibility, suitability and risk of the development. If any information submitted by building owners to the MHFA is later found to be incorrect in any material respect, it is the responsibility of the building owners to inform MHFA and to request a reexamination of the information. MHFA is not, and is not acting in the capacity of, a real estate agent or real estate broker. Its role is limited to implementing the Code requirements and facilitating the presentation of a qualified contract, as defined in the Code. Interested parties should obtain advice from independent sources, including consultation with knowledgeable tax professionals and legal counsel.. This guide has not been reviewed or approved by the IRS and should not be relied upon for interpretation of federal income tax legislation or regulations. Housing Tax Credit Program 2 Qualified Contract Process Guide (rev.12 /05) • QUALIFIED CONTRACT Section 42(h)(6)(E)(i)(II) of the Internal Revenue Code created a provision that housing credit agencies respond to the request for presentation of a qualified contract for tax credit developments with expiring compliance periods. The request for presentation of a qualified contract may occur after year 14 of the compliance period. The request for presentation of a qualified contract is a request that the housing credit agency find a buyer (who will continue to operate the property as a qualified low- income property) to purchase the property for a qualified contract price (QCP) pursuant to IRS regulations. If the housing credit agency is unable to find a buyer within one year, the extended use period is terminated. Many owners have chosen to waive the right to request a qualified contract and have committed to thirty years or more of operation as low- income rental housing. Owners should review the respective QAP, development tax credit application, carryover agreement, and Declaration of Land Use Restrictive Covenants to determine whether the development has waived the right to request a Qualified Contract prior to contacting the MHFA. A Request for Qualified Contract may be submitted only once for each development. If an owner rejects an offer presented under the Qualified Contract or withdraws its request at any time after the Notification Letter and Application Materials have been received by MHFA, no other opportunity to request a Qualified Contract will be available for the development in question. A. QUALIFIED CONTRACT PROCESS 1. Owners who are contemplating requesting the presentation of a Qualified Contract should contact the MHFA Tax Credit Compliance Coordinator. MHFA will verify the development's eligibility. 2. If the property is determined eligible to request a Qualified Contract, MHFA will send a letter of acknowledgement to the owner along with: (a) MHFA form of Qualified Contract Notification Letter (b) Qualified Contract Process Guide and related Application Materials (c) Current year dates when requests for Qualified Contracts will not be accepted by MHFA (which will generally coincide with the Consolidated Multifamily RFP schedule). Housing Tax Credit Program 3 Qualified Contract Process Guide (rev.12 /05) • • 3. The Tax Credit Allocation Team will assign an Underwriter to work with the Owner to discuss issues pertinent to the development and possible alternatives to the qualified contract process. Owners should be prepared to present a thorough analysis of all current financing and related restrictions. 4. If a property is not eligible to request a Qualified Contract MHFA will issue the owner a letter of denial. B. QUALIFIED CONTRACT NOTIFICATION LETTER The next step in the process for requesting a Qualified Contract is to submit the Qualified Contract Notification Letter, along with all required Application Materials. This request may be submitted any time after the fourteenth year of the compliance period. The Notification Letter contains statements from the owner that the owner will reasonably cooperate with MHFA and its agents with respect to the marketing of the property, and acknowledges that the Application Materials may be shared with prospective purchasers, real estate brokers and other interested parties and that summary data may be posted on MHFA's website. The owner will be asked to acknowledge in the notification letter that they have reviewed the due diligence materials used in the calculation of the qualified contract worksheets and that they are solely responsible for documents and information used in the calculation of the Qualified Contract Price, using the procedure set forth in Section 42(h)(6)(F) of the Internal Revenue Code. The owner will be asked in the notification letter to sign a statement verifying the accuracy of the assumptions used in the computation of the Qualified Contract Price and to hold MHFA harmless with respect to the use of the development information. Additional information may be requested by MHFA, including but not limited to, additional rent rolls, income certifications and other Section 42 compliance records, records with respect to repair and maintenance of the development, operating expenses and debt service. Before information is shared with a prospective purchaser, the owner may require that the Agency and /or the prospective purchaser enter into a commercially reasonable form of nondisclosure agreement. The owner may also be asked by MHFA to share, upon request, the documents and other information that were used to prepare the Calculation of Qualified Contract Price (QC -1). The owner will be asked to allow MHFA, its agents, or prospective purchasers, upon reasonable prior written notice, to visit and inspect the development, including representative apartments units. Housing Tax Credit Program 4 Qualified Contract Process Guide (rev.12 /05) C. APPLICATION MATERIALS The Qualified Contract Notification Letter must be submitted along with the following materials from the owner: 1. A thorough narrative description of the development, including all amenities, suitable for familiarizing prospective purchasers with the development. 2. A description of all income, rental and other restrictions, if any, applicable to the operation of the development. 3. A detailed set of photographs of the development, including the interior and exterior of representative apartment units and buildings, and the development grounds. Digital photographs should be included so that they may be easily displayed on MHFA's website. 4. A copy of the most recent 12 months of operating statements for the development which will fairly apprise a potential purchaser of the development's operating expenses, debt service, gross receipts, net cash flow and debt service coverage ratio. If available, 3 -years of audited financial statements. 5. A current rent -roll. 6. All years of tax returns for the Partnership. 7. A copy of the development Limited Partnership Agreement; 8. Disclosure of Rights of First Refusal, if any. 9. If any portion of the land or improvements are leased, copies of the leases. 10. A physical needs assessment. 11. A fully completed "Calculation of Qualified Contract" Price (form QC -1), including Worksheets A — E (see Section D, below for a brief description of these worksheets), along with copies of the documents and other information used to support the Qualified Contract Price. This form must be completed and certified by a Certified Public Accountant. 12. A Qualified Contract processing fee of $5,000. D. CALCULATION OF QUALIFIED CONTRACT PRICE WORKBOOK Form QC -1 contains accompanying worksheets A -E, as described below: Worksheet A: Outstanding Indebtedness, a summary of all outstanding secured indebtedness on the low - income building(s). Worksheet B: Calculation of Adjusted Investor Equity in the low - income building(s), by year. Worksheet C: Other Capital Contributions made by the investor in the low - income portion of the building(s). These are contributions that are not included in other calculations, specifically in the "Outstanding Indebtedness" or "Adjusted Investor Equity" worksheets. Housing Tax Credit Program 5 Qualified Contract Process Guide (rev.12 /05) Worksheet D: Cash Distributions from, or available from the development, by year. This calculation also includes a reporting of the cash held in Reserve Accounts and Partnership Accounts. Also included here are non -cash distributions that have been made by the owner. These non -cash distributions will not be applied to reduce the "qualified contract price" but must be reported. Worksheet E: Fair Market Value on Non - Low - Income Portion of the Building(s). This worksheet requires an appraisal, study or methodology proof or other support used to establish the market value of the non -low- income portions of the building(s). E. REVIEW PROCESS 1. Upon receipt of the owner's Notification Letter and Application Materials, MHFA will have 60 days to review the owners' packet of due diligence materials for completeness. MHFA will send owner a letter acknowledging that all notification requirements have been met. 2. After MHFA has received all required documentation, MHFA will have 60 days to validate the Qualified Contract Price (QCP) proposed by the Owner. This will require staff and the owner to work closely together to ensure that an appropriate QCP has been set. 3. Once the QCP has been approved, MHFA will notify the owner that the one- year period to find a prospective buyer for the development has begun. 4. During the one -year period MHFA will advertise the property in good faith. MHFA's process to identify an interested purchaser may include, but not be limited to: (a) Post the property information on MHFA website. (b) Put together an informational flyer and send to a pre - established mailing list. This list will include owners of tax credit properties; contacts at large management companies; other public funding agencies in the state; local, state and nation -wide nonprofit and for profit owners interested in preserving housing; and tax credit investor contacts. (c) Present information on the property(s) to regional development groups, preservation groups and other stakeholder meetings we attend (add to the agenda). Housing Tax Credit Program 6 Qualified Contract Process Guide (rev.12 /05) (d) Act as a conduit for all requests of prospective purchasers by quickly responding to requests for additional information from the owner and forwarding that information immediately upon receipt. F. COMPLETION OF QUALIFIED CONTRACT PROCESS 1. If MHFA has identified a prospective purchaser, it will present to the owner, a qualified contract as defined in IRC Section 42(h). 2. If the owner accepts and the property is sold, notify MHFA of the transfer of ownership by submitting the Notice of Intent to Transfer Ownership or Change Owner Name or Status (HTC 27) along with accompanying documentation. 3. If MHFA is unable to locate a purchaser who will continue to operate the property as low- income, the owner will be notified that the extended -use period will terminate. However, pursuant to IRC Section 42(h)(6)((E)(ii), existing residents will continue to have the right to rent at the restricted rent levels and may not be evicted or have tenancy terminated for other than good cause for a period of three years following the termination of the extended use period. During this 3 -year period, owners are required to annually submit the Tax Credit Summary Report (HTC 13) to MHFA listing all low- income households that occupied a unit at the termination of the extended use period, the respective tenant -paid rent, utility allowance, and move -out date, if applicable, along with a certification that no low- income residents have been evicted or displaced for other than good cause. This report and certification will be due on February 15th or the next business day. No monitoring fees will be due during this 3 -year period and MHFA is not required to perform inspections. Housing Tax Credit Program 7 Qualified Contract Process Guide (rev.12 /05) FEES AND CHARGES The fee for processing a Qualified Contract request is $5,000. The fee must be submitted at the time the Qualified Contract Notification Letter is presented to MHFA, and is non- refundable. Any charges incurred for submission materials, appraisals, market studies, and rent comparability studies will be borne by the owner. DATA PRIVACY Government Data Practices Act Disclosure Statement During the Qualified Contract process, certain development financial and tenant income information will be needed as verification. In working with tenants, the owner warrants compliance with applicable data privacy laws and regulations including the Minnesota Government Data Practices Act which governs information obtained, stored and /or released in connection with public programs. Housing Tax Credit Program 8 Qualified Contract Process Guide (rev. 2/05) • • • WS — Item 1 WORK SESSION STAl+l+ REPORT Work Session Item 1 Date: June 7, 2010 To: City Council From: Mary Alice Divine Re: Cottages of Willow Ponds Senior Housing Background In 1995 the Lino Lakes Economic Development Authority (EDA) entered into a contract with Cottage Homesteads of Willow Ponds to provide an affordable senior housing project on Elm Street. In the contract the EDA agreed to provide available tax increment generated by the project for a period of 15 years, beginning in 1997. The contract, therefore, expires with the final TIF payment in 2012. In Section 8.7 of the contract, entitled "Subordination ", it states: "Upon request by a mortgagee providing financing or refinancing of the minimum improvements, the Authority agrees to subordinate this Agreement to the rights of any such mortgagee." This subordination clause to lenders is typical in TIF contracts. The Contract also contains an Exhibit C, called a Declaration of Covenant and Restriction. This Declaration requires that the project be occupied by one person who is 55 years of age or older. This covenant expires on February 1, 2026, which is 14 years after the TIF contract expires. The covenant states that it shall not be modified or revoked prior to this termination date. Lino Lakes Housing Limited Partnership is proposing to purchase the senior project. The financing will have Housing and Urban Development (HUD) as the underwriter. The property intends to stay an affordable senior project, and HUD will have its own requirements that it remain a senior facility for ages 62 +. However, according to HUD regulations, the Declaration of Covenant and Restriction must also be subordinate. This would allow HUD, in the event of foreclosure on the property, to determine if it was in its best interest to sell the property without the age restriction. 1 Requested Council Direction Council is asked to consider whether it wishes to subordinate the Declaration of Covenant and Restriction. EDA counsel Steve Bubul from Kennedy & Graven and the representative from Lino Lakes Housing Limited Partnership will attend the work session to answer questions. Attachment(s) 1. Declaration of Covenant and Restriction 2. Letter from Lino Lakes Housing Limited Partnership's counsel requesting subordination of the Declaration of Covenant and Restriction 2 • • • EXHIBIT C DECLARATION OF COVENANT AND RESTRICTION This Declaration of Covenant and Restriction is made as of this day of , 1995, by Cottage Homesteads of Willow Ponds Limited Partnership ( "Declarant "), a Minnesota limited partnership. RECITALS WHEREAS, Declarant owns the property legally described on the attached Exhibit A (the "Subject Property "); WHEREAS, pursuant to that certain Contract for Private Redevelopment dated , 1995 by and between the City of Lino Lakes Economic Development Authority (the "Authority ") and Declarant, the Declarant is required to impose certain covenants and restrictions upon the Subject Property; WHEREAS, the Subject Property is to be improved with four buildings • containing twelve multi- family residential units each, for a total of 48 units; • WHEREAS, of the 48 units, 47 will be used for occupancy by residents (the "Occupied Units ") and it is anticipated that one unit will be used as a community room; WHEREAS, the Authority requires that the Occupied Units be restricted as set forth herein; NOW, THEREFORE, Declarant hereby declares and imposes upon the Subject Property the following covenant and restriction: 1. For the purpose of complying with the requirements imposed by the Authority, Declarant hereby declares that each of the 47 Occupied Units shall, to the extent occupied and not vacant, be occupied by at least one occupant who is fifty -five (5 5) years of age or older. 2. The foregoing covenant and restriction shall expire on February 1, 2026 (the "Termination Date "). r': 1DOC\KT1vP56304 3. The foregoing covenant, restrictions and other terms of this Declaration shall be for the benefit of the Authority and shall not be modified or revoked prior to the Termination Date without the written approval of the Authority. COTTAGE HOMESTEADS OF WILLOW PONDS LIMITED PARTNERSHIP By: Lumber One Properties 111, Avon, Inc. Its: General Partner By // 'Li Terry S�Nmid Its: President STATE OF 17.,�:i�'T� )SS. COUNTY OF The foregoing instrument was acknowledged before me this 2-3 day of „Li/0-7 , 1995 by Terry Schmid, the President and General Partner of Lumber One/Properties 111, Avon, Inc., a Minnesota corporation and general partner of Cottage Homesteads of Willow Ponds Limited Partnership, a limited partnership, on behalf of the limited partnership. BARBARA J. BRANDES NOTARY PUBLIC - MINNESOTA My Comm. Exp. / Jan. 31, 2000 ; WIROVVW DRAFTED BY: Dennis J. Trooien, Esq. Fabyanske, Svoboda, Westra & Hart, P.A. Suite 1100, Kinnard Financial Center 920 Second Avenue South Minneapolis, Minnesota 55402 (612) 338 -0115 F:1DOC\K]M`56304 -2- Notary Public • • • • • • WINTHROP WEINSTINE ATTORNEYS AND COUNSELORS A T LAW May 26, 2010 City of Lino Lakes 1189 Main Street Lino Lakes, MN 55014 Attention: EDA Executive Director Amy L. DuMond Direct Dial: (612) 604 -6603 Direct Fax: (612) 604 -6903 adumond((L Winthrop.com VIA MESSENGER RE: NOTICE AND REQUEST FOR SUBORDINATION Contract for Private Redevelopment dated October 3, 1995, executed by and between Lino Lakes Economic Development Authority and Cottage Homesteads of Willow Ponds Limited Partnership (the "Contract ") Ladies and Gentlemen: As you are aware, Lino Lakes Housing Limited Partnership ( "Owner ") is refinancing the real property located at 101 Willow Pond Trail, Lino Lakes, Minnesota (the "Project ") which Project is subject to and encumbered by the above - referenced Contract. The refinance loan will be provided to Owner by Dougherty Mortgage LLC ( "Dougherty ") and such loan will be insured by the United States Department of Housing and Urban Development. Section 8.7 of the Contract states that "[u]pon request by a mortgagee providing financing or refinancing of the Minimum Improvements, the Authority agrees to subordinate this Agreement to the rights of any such mortgagee ". Please be advised that in accordance with Section 8.7, Dougherty hereby notifies the Lino Lakes Economic Development Authority (the "Authority ") that Dougherty is providing financing to the Project and that Dougherty requests that the all of the Authority's right, title and interest in and to the Agreement (including all attached documents and instruments thereto) be subordinated to Dougherty's first mortgage loan and loan documents. As Dougherty's first mortgage loan is insured by HUD, the form of subordination must comply with HUD's requirements for the first mortgage loan. Attached hereto for execution by the Authority is the First Amendment to Contract for Private Redevelopment and Subordination Agreement (the "First Amendment "). The amendment and subordination provisions set forth in the First Amendment are also to be added to and included in the Declaration of Covenant and Restriction (the "Declaration ") prior to its execution and recordation. As the Declaration is part of the Contract, the Declaration is also subject to the Authority's agreement to subordinate as set forth in Section 8.7. The First Amendment and request for revisions to the Declaration have been previously provided to Steve Bubel, the Authority's counsel. CAPELLA TOWER Suite 3500 1 225 South Sixth Street I Minneapolis, MN 55402 -4629 I MAIN: (612) 604 -6400 I FAX: (612) 604 -6800 I wwucwinthrop.com I A Professional Association City of Lino Lakes May 26, 2010 Page 2 If you have any questions regarding this matter, please contact the undersigned. Sincerely, WINTHROP & WEINSTINE, P.A. On behalf of and as attorneys for loo gherty Mortgage LLC Amy L.'huMond Enclosure Cc (via email): Charles Riesenberg / Lino Lakes Housing Limited Partnership J. Patrick Brinkman / Felhaber Larson Fenlon & Vogt Steven Bubul / Kennedy Graven Tim Larkin / Dougherty Mortgage LLC 5256470v1 • • • • • WS — Item 2 WORK SESSION STAFF REPORT Work Session Item 2 Date: Council Work Session, June 7, 2010 To: City Council From: Michael Grochala Re: Anoka County Ditch 10 -22 -32 Consolidation Background Anoka County Ditch (ACD) 10 -22 -32 is located in the NW corner of Lino Lakes with a small portion in Columbus Township. A series of separate and new ditch improvements has occurred over the years, since the first ACD 10 ditch was constructed in 1890. Each new recorded ditch segment added to ACD 10 overlapped the previous ditch section. Rice Creek Watershed District (RCWD), the ditch authority for 10- 22 -32, intends to consolidate these ditch segments into one legal ditch branch. Under state law the Rice Creek Watershed District may undertake proceedings related to the drainage system in accordance with the Watershed Law (Minnesota Statute Chapter 103D) rather than the Drainage Code (Minnesota Statutes Chapter 103E) subject to concurrence by the city council where the system is located. The RCWD is requesting City consideration of a resolution consenting to their proposal to conduct proceedings for Anoka County Ditch 10 -22 -32 under Minnesota Statutes Chapter 103D. This request has been prompted by the district's efforts to systematically inspect and repair the legal drainage systems in the district (approximately 100 miles) as necessary. In Lino Lakes this includes Anoka County Ditch (ACD) 10- 22 -32, ACD 25, ACD 72 and ACD 53. The RCWD is currently in the process of preparing a repair report for the drainage system. The report will provide review of the ditch system and recommend a repair option that balances the drainage function of the system with ecological concerns in the watershed. Use of the authorities granted under the Watershed Law will facilitate flexibility in financing the recommended repair option which is important to the RCWD for the following reasons: 1. If they stay under the narrow confines of the ditch law, the district would have to do a re- determination of benefits and damages which would add unnecessary costs to any project. 2. The Watershed Law would allow them to set up a stormwater charge system which is more equitable since the land use is no longer just agricultural. 1 3. It allows the RCWD to better address the protection and enhancement of wetlands and other water resources as part of any project to repair and maintain the system. This approach falls in line with the processes set up in the Resource Management Plan (RMP). The ACD 10 -22 -32 branch system is the largest and most complex in Lino Lakes. The headwaters of the ditch are in Columbus, where traditional agricultural land use is principally in practice and drainage is an important benefit. Aggressive management of a ditch system management plan will incorporate the need for agricultural benefit practices that maintain drainage in the headwaters, and also respect the shift away from agricultural land uses downstream, incorporating and recognizing the new urban ditch benefits. The new urban benefits will provide ancillary benefits for subwatershed — wide flood reduction and wetland protection where such benefits are desired. New ditch management planning will use branch maintenance in rural areas, retrofits in urbanizing areas, and master planned communities with greenways and open space to reduce downstream flooding and retain and reuse water in local catchments. Since the RCWD has a legal obligation to inspect, operate and maintain surface water management systems in Lino Lakes, it would be beneficial to the city to support the RCWD in a way that follows our RMP The recognition of the use of alternative authorities is important. This does not mean, however, that concurrence with the use of alternative authority is an endorsement of any project, and that there will be a separate public process for any future project. The Environmental Board was scheduled to review the request on Wednesday, June 2. Their recommendation will be available at the council meeting. Council Direction Staff is requesting council consideration to place the RCWD request on a future council meeting agenda. 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Q_ n 0) v rn N o CD (-I- Cr -O 0.) 0) - rD r+ 0 N r+ Q_ O O rD+ rD rD o 3 O r+ r+ ccr Q O r). O < O n CT 0) O ( Q < n rD 7 Cu _-h N - N rD 0) O n 3 r+ _� CAI N N. (D -0 0 -3 O• rD (D n rt • N. CM (DD o ?v • r+ • rD v, D3crD -O -h? _O n rD 0 n C r+ N r+ rD 0 -5 Q 0) r-t c N CU (D rns • Q_ 0 0) o' n (D O : Q E3 5. Q_ n rt rD Q_N Q_ Cu rD Q r+ I • -0 _E3 0 (D4 0 -h CAIO O� 0) rN-F • • aDuaaanOuoD • • • D n CU * CT . -0 0 n M CO 0 CU CU r+ CD a m O 20 m- 0) e o. aD!.oN . SJ UMo AliadoKI papajje �aodaa saaaui2u3 I 73 D O - n zi O. C CD n CD v) cm = O n r+ rp O ID c C 0M 713 0) (D 0M n) • Not an endorsement of any project c . n 7:3 cl) DuJJnDuoJ (/) RESOLUTION <LOCAL GOVERNMENT GOVERNING BODY> APPROVAL TO CONDUCT DRAINAGE PROCEEDINGS FOR ANOKA COUNTY DITCH 10 -22 -32 UNDER THE WATERSHED LAW WHEREAS, Rice Creek Watershed District ( "RCWD ") is the drainage authority for Anoka County Ditch 10- 22 -32. (the "Drainage System "); WHEREAS, RCWD is proceeding on a petition to repair the Drainage Systems; WHEREAS, the RCWD Engineer is preparing a repair report recommending a repair option that balances the drainage function of the Drainage Systems with ecological concerns in the watershed; WHEREAS, Minnesota Statute 103D.621 Subd. 4, grants RCWD the authority to undertake proceedings related to the Drainage Systems in accordance with the Watershed Law (Minnesota Statutes Chapter 103D) rather than the Drainage Code (Minnesota Statutes Chapterl 03E), subject to concurrence by city councils and town boards where the Drainage Systems are located; WHEREAS, RCWD has requested concurrence from to conduct the necessary proceedings related to the Drainage Systems under the Watershed Law and the Drainage Code; WHEREAS, the purpose of conducting proceedings under the Watershed Law is to provide consistent management of all drainage systems under RCWD management, comprehensive wetland management, and appropriate administration of resource management plans; and WHEREAS, conducting the proceedings under the Watershed Law will facilitate flexibility in financing the recommended repair option. NOW THEREFORE BE IT RESOLVED BY <Local governing body> THAT: The <local government>, in accordance with Minnesota Statute 103D.621 Subd. 4., consents to the Rice Creek Watershed District's request to conduct proceedings for Anoka County Ditch 10- 22-32 under Minnesota Statutes Chapter 103D. Adopted , 2010. ATTEST: Mayor City Clerk/Administrator 1 • • • WS — Item 3 WORK SESSION STAFF REPORT Work Session Item 3 Date: 7 June 2010 To: City Council From: Daniel Tesch, Director of Administration/Interim C.A. Re: English as Official Language Background Council Member Roeser has asked staff to look into the possibility of establishing English as the official language for the city. I have contacted the League of Minnesota Cities and they have provided the information enclosed. According to the league, governmental entities can and have adopted such policies, they have also been challenged on many and varied grounds — there is no clear case law. To my knowledge, we have not had a request for a translator or that materials be translated into another language. I understand there are situations when the police department has enlisted the services of a translator. A couple of considerations: • Cities are required to provide services and opportunities equally to everyone regardless of culture, ethnicity or religion. • Does the city have a large minority population? • There is the possibility of a perception that a City is "not welcoming and unfriendly ". Requested Council Direction Council prerogative. 1 Attachment(s) 1. Information from the League of MN Cities. • • Dan Tesch From: Beety, Patricia [PBeety @Imc.org] Sent: Tuesday, April 27, 2010 4:37 PM To: Dan Tesch Subject: RE: Lino Lakes Hi Dan. Sorry I have been so slow to get you this info. I have started legal research a couple of times and ended up fording few clear answers - -the law on whether or not governments can require English as official language is conflicting and very confusing. Basically, government entities can and have adopted such policies but they have been challenged on many and varied grounds. It appears difficult to get them struck down, however, because there is not a good statutory remedy and standing issues (who can challenge these requirements) abound. I thought the following quote from a recent (2006) Oklahoma court case was informative on the issue: The issue,moreover, ap ears to grow increasingly divisive every year. Prior to 1981, only two states had laws declaring g" their %, , Wa, but by 1996, twenty -two states and forty municipalities had enacted III iii language legislation. Brian L. Porto, Annotation, "English -Only" Requirement for Conduct of Public Affairs, 94 A.L.R. 5th 537, § 2 (2004). As of 2003, twenty -three states had enacted some form of English language legislation, and since 2000, courts in Alaska, Utah, Oklahoma and Iowa have addressed their validity. See Kenya Hart, Defending Against A "Death by English": English -Only, Spanish -Only, and a Gringa's Suggestions for Community Support of Language Rights, 14 BERKELEY LA RAZA L.J. 177, 178 -79, 187 (2003). In an opinion decided in 2002, the Supreme Court of Oklahoma ruled that an initiative petition proposing a state -wide English -only statute was constitutionally flawed because the proposed law ran afoul of the state constitution's free speech provisions. In re Initiative Petition No. 366, 46 P.3d 123, 125 -28 (Okla.2002). In announcing its decision, the court noted the intensity of the state -wide debate sparked by the initiative. Id. at 125. Moreover, powerful public policy groups on both sides of the debate continue to marshal substantial resources to support or defeat English -only legislation at the national, state and municipal levels. See Hart, supra, at 178 -79; see also Michael Albert Thomas Pagni, The Constitutionality of English -Only Provisions in the Public Employee Speech Arena: An Examination of Yniguez v. Arizoniansfor Official English, 24 HASTINGS CONST. L.Q. . 247, 248 -49 (1996); Margaret Robertson, Abridging the Freedom of Non- English Speech: English -Only Legislation and the Free Speech Rights of Government Employees, 2001 BYU L. REV. 1641, 1641 -42. So, I guess the bottom line is that these policies are controversial and there are interest groups on both sides fighting legal battles over their validity. And no clear case law has been developed in Minnesota to help guide a municipality that chooses to venture down this road. Pat Patricia Y. Beety Attorney at Law Tel: (651) 281 -1270 Fax: (651) 281 -1298 pbeety(ii?I nc.orQ I www.lmc.org League of Minnesota Cities 145 University Ave. West l St. Paul, MN 55103 • Connecting & Innovating since 1913 1 Dan Tesch From: Beety, Patricia [PBeety ©Imc.org] Sent: Wednesday, March 10, 2010 3:37 PM To: Dan Tesch Subject: FW: English as Official Language Attachments: 4865_001. pdf Dan: below is the information our research department pulled for me on this issue. I will do some quick legal research as well to see if there are legal risks associated beyond those described in these materials. Pat Patricia Y. Beety Attorney at Law Tel: (651) 281 -1270 ( Fax: (651) 281 -1298 pbeetv,ir lmc.org www.lmc.org League of Minnesota Cities 145 University Ave. West J St. Paul, MN 55103 Connecting & Innovating since 1913 Pat, The only thing I found that the League has produced relating to using the English language is this article from the October 2002 Minnesota cities magazine, suggesting that for equal protection reasons, a city should consider communicating in more than one language. That would be in addition to common sense public safety and welfare reasons. Of course, having English as your "official" language does not preclude you from communicating in other languages, but it symbolically represents that no accommodation will be made. The article is attached, below. «4865_001.pdf» In certain instances, the city may even be required to communicate in other languages, notwithstanding an "official language" policy. For example, the city of Princeton in February 2009 asked us for assistance in finding language identification flash cards for individuals with limited English proficiency because it was required for a grant they sought dealing with assistance on foreclosures. Apparently many states have declared English their official language — at least according to this web site: http: / /www.proenglish.org /issues /offeng /states.html On the other hand, this story about a Nashville, TN ballot measure last year gives some good reasons why not to adopt such a stance, and the voters in Nashville apparently agreed. In Nashville, a Ballot Measure That May Quiet Ail but English (January 11, 2009) Nashville voters on Thursday rejected a proposal to make English the city's official language and largely prevent government workers from communicating in other languages. 1 • The proposal was introduced by Eric Crafton, a metropolitan councilman. It was opposed by a broad coalition including the mayor, civil rights groups, business leaders, ministers and the heads of nine institutions of higher education. The results of this special election reaffirm Nashville's identity as a welcoming and friendly city," Mayor Karl Dean said in a statement. Mr. Crafton had said the policy would encourage immigrants to learn English and save the city more than $100,000 in translation and related costs. The policy allowed exceptions to its English -only rule for issues of health and safety. Critics said the proposal would tarnish Nashville's reputation as a cultural mixing pot and drive away immigrants and international businesses. They also accused Mr. Crafton of worsening anti - immigrant sentiment and wasting at least $350,000 of taxpayer's money on a special election. Thirty states, including Tennessee, and at least 19 cities have declared English their official language, according to the U.S. English Foundation, which advocates such policies. I hope this helps you out some... Jeannette Bach 1 Research Manager Tel: 651- 281 -1223 I Fax: 651 - 215 -4123 • jbach(clmc.org I www.lmc.orq League of Minnesota Cities 145 University Ave. West 1 St. Paul, MN 55103 Connecting & innovating Since 1913 • 2 Providing City Services Equitably t first glance, cultural diversity and loss control in cities seem like unrelated issues; however, they are very intertwined. Cities are charged to provide services and information to all residents equally, and Minnesota cities — large, small and statewide —are becoming home to many different cultures. This article recommends steps to provide city services more equally to all citizens to avoid claims, lawsuits, and losses. Providing warning signs. Dangerous situations may happen on city property or m buildings. If a city decides to make citizens aware of the dangers through signs, these signs need to be understandable to be effective. If the city knows that there is a significant population of non - English or limited - English speakers using city facilities and buildings, the city should consider placing warning signs in the languages represented in the community. In some situations, pictographs may be an option since it may not be possible to translate signs in all languages if many different ethnic groups are represented in a city. Pictographs are picture signs that can be understood by all. A common example of a pictograph is a picture representing an action in a circle with a line across it to illustrate prohibition. Treating citizens equally. As people of ethnic backgrounds may be distin- guishable from the rest of the commu- nity—by the way they dress, by their physical appearance, or by other exter- nal characteristics —it is imperative that city officials treat all residents equally. One area where equal treatment is par- ticularly important is in the area of public safety. Public safety officials should be aware of the laws governing their actions and the international laws that apply to for- eign nationals. For example, a police officer who stops or arrests a person of OCTOBER 2002 By Ellen Longfellow an ethnic population based solely on external characteristics rather than prob- able cause is breaking the law. The police officer is using racial profiling to appre- hend someone, which is an illegal practice. Another public safety consid- eration to be aware of is the fact that arrested or detained foreign nationals have the right to contact their home country's consular offices. Cities also have regulations regarding the use of a person's property, such as housing codes, nuisance ordinances, and zoning ordinances. Cities should review these restrictions and regulations to determine if they have been drafted for public safety or health reasons, and are not solely based on the norms of the predominant culture. Another way to foster effective community relations is to hire city officials who speak the languages repre- sented in the city or to teach officials a few words in these languages. Interpret- ers and translators are also effective resources to bridge the language gap with the communities in your city. Providing information on policies, rules, and regulations. Besides public safety and housing regulations, cities provide sewer and water services that are also governed by specific rules established through ordinances and policies. City ordinances state rates to be charged, when and how bills must be paid, and what happens when bills are not paid. To enforce the rules established by city ordinances, cities need to make sure citizens understand these policies and rules. As mentioned earlier, cities should take steps to help residents who do not speak English or have limited English skills to understand the rules and regu- lations. Providing information in a way that can be understood is even more pressing when there is a significant ethnic population within the city. Cities can infonn and educate citizens by translat- ing existing materials into the languages represented in the community, and by holding meetings with interpreters to explain these rules and regulations. Providing equal access to opportunities. Cities are required to provide services and opportunities equally to everyone regardless of culture, ethnicity or religion. Cities cannot discriminate against any- one in the delivery of services and access to opportunities. For example, a person of a certain religion who is required to cover his or her head at all times cannot be denied participation in a city basket- ball league unless there is a safety concern or other legitimate reason for prohibit- ing head coverings. Cities should note that arbitrary rules can be used as a basis for discrimination claims. r Ellen Longfellow is loss control attorney with the League of Minnesota Cities. M I N N E S O T A C I T I E S 1 5 L(712., w Sessta",- English as Lino Lakes Official Language As Council Members we are charged with guiding the city with regards to present and future issues. The reason to discuss this now is to put in place a method for the city to function before an individual or group demands we embark on a costly road. This topic was raised at the beginning of the year when looking for ideas to control the cost of government. mainly: cost avoidance and eaualitv. Regarding cost avoidance; • The cost to convert our phone system into one with choices for language preferences and related upkeep of translation charges • The cost of lawsuits should the city hire an interpreter and there is an error in tranclatinn • The cost of translating every ordinance, etc into several different languages and the ongoing maintenance of every new ordinance into those languages. • The cost of multi - lingual signage throughout the city. • The cost of printing forms and applications in different languages. • The cost to maintain the City's website in multi - languages. Regarding equality: • Once the city makes an exception from English, it would be unequal treatment to only include one additional language. Which languages, Polish, Russian, Spanish, Somalia. or the several languages of Southeast Asia? A recent state document offered over a dozen language choices. • Fair and equal treatment is assured with one language. • We should encourage the learning of English so that persons do not have to rely nn ntherc to handle trancartinnc fnr them • Assuming minority groups require language translation and interpretation is wrong and a demeaning stereotypical response. Placing a rule in place now allows the City to respond swiftly and correctly should this iccne arks in the f ttnre If an individual or group views this as an unfriendly practice, frankly, how unfriendly is it to expect the taxpayers to pick up the cost to communicate in only that individual's or group's language? Dave R Heger • • • WS — Item #4 WORK SESSION STAFF REPORT Work Session Item #4 Date: June 7, 2010 To: City Council From: Julie Bartell, City Clerk Re: Liquor License Renewal Issue Background The Council annually considers the renewal of liquor licenses in the city for our licensing period of July 1 through June 30. Staff has been reviewing the current renewal applications for these licenses and is prepared to present them for council consideration on Jurie 14. An issue has arisen regarding the license application of Red Oak Steaks and Wine. The licensee, Mr. Tom Wilzbacher, has refused to pay the background investigation fee that is a required part of the application process. Historically Mr. Wilzbacher raised concern about this fee being charged for renewals (state statute requires a background check upon the initial application and allows cities to charge a fee for a renewal investigation if the governing body deems that practice is in the public's interest). In order to address this concern, the council in 2009 reviewed the city's background fee process and, after looking at a comparison of what other cities are doing and hearing about city costs, decided that there would be no change. Mr. Wilzbacher was informed of the council's decision but has not paid the outstanding fee of $250. He has indicated that he will not be paying this year's fee either. Section 701.07 of the Lino Lakes City Code regarding Liquor Licensing reads as follows: $ 701.07 PLACES INELIGIBLE FOR LICENSE. (2) Delinquent taxes and charges. No license shall be granted for operation on any premises for which taxes, assessments or other financial claims of the city are delinquent and unpaid. 1 Requested Council Direction Consideration of liquor license renewal requests will be considered at the council meeting on June 14. The delinquent fees owed by Red Oak Steaks and Wine would appear to make that establishment ineligible for a license and therefore ineligible for renewal. Since all liquor licenses expire on June 30, 2010, staff requests council direction on whether or not to prepare for the process required to not renew this license. City Attorney Langel has been asked to attend the work session for this discussion. • • compiled March 2009 on City Pop. Initial In- state—ffivestigation Fee renewal Lino Lakes Blaine Minnetonka Crow Wing Co. 19,736 $450 (250 individual) 54,927 $500 (on sale) 51,519 $500 Isanti same no investigation n/c $150 $25 5,206 $300/$100 n/c Bloomington Osseo Circle Pines Northfield Belle Plaine 85,852 2,459 Golden Valley 5,153 19,413 6,595 20,355 $500 ($150 in state) $100 $200 $500 (unused t/b rec'd) portion n/c n/c New Ulm 13,610 $200 $200 $100 $3,000 Dep / $500 non refundable n/c $100 $200 n/c Buffalo 13,776 $300 n/c Plymouth Oakdale Robbinsdale St. Peter Burnsville Stillwater 70,676 27,249 13,698 $500 n/c Single, $350/$500 $500 10,887 $250 61,355 22,532 II n/c $250 $150 varies ($1500 -$500) $50 $300 $150 • • • WS — Item # 5 WORK SESSION STAFF REPORT Work Session Item #5 Date: June 7, 2010 To: City Council From: Dave Pecchia, Chief of Police Re: 2009 Annual Report Background Discussion of the 2009 Annual report. Requested Council Direction Add to council agenda for the June 1, 2010 council meeting Attachment(s) 1. Updated Pages 33 and 34 with 2009 crime rate stats. 1 • • • WS — Item # 6 WORK SESSION STAFF REPORT Work Session Item # 6 Date: June 7, 2010 To: City Council From: Dave Pecchia, Chief of Police Re: Replacing vacant Police Officer Position Background Continuation of the discussion on whether to backfill the Police Officer opening created by the promotion of Officer Dale Hager to Sergeant. This is a funded position in the approved 2010 budget. The process for promotion of existing CSO Kristen Wills is substantially complete, the remaining background and medical evaluations are not authorized by state law unless there is a conditional job offer. Requested Council Direction Staff is requesting council direction to either make a conditional job offer or delay. Attachment(s) 1. Financial impact of promoting a current CSO to Full Time Sworn Officer 1 Financial impact of moving a part time CSO to full -time officer on the 2010 /2011 budget. Cost of a full time, first year police officer Cost of a part time CSO Difference State provides $7,132 per officer bringing the difference to ($43,623 - $7,132436,491) $70,532 $26,909 $43,623 $36,491 State provides an additional $350 for training making the final difference $36,141 The difference in cost between a full time police officer and a full time CSO: Cost of a full time, first year police officer $70,532 Cost of a full time CSO $53,818 Difference State provides $7,132 per officer bringing the difference to $16,714 $9,582 State provides an additional $350 for training making the final difference $9,232 Additional savings not included in original 2010 budget: Two months of Officer Hagert's salary* $13,134 HSEM Grant $10,000 Funding from Ramsey County Violent Offender Task Force $15,000 Total savings /additional revenue for 2010 $38,134 * this is just for two months of her salary, she thinks she will have another two months of military leave in 2010 making the savings on her salary approximately $26,268 2011 savings on Officer Hagert's salary $65,670 • • • 1 i Calls for Service by Frequency — Below is a list of the ten most common calls for service (excluding traffic citations). Call Type 2004 2005 2006 2007 2008 2009 Suspicious Activity 1111 1575 1283 878 734 655 Traffic Accidents 356 393 349 349 351 285 Alarms 414 368 413 413 338 305 Thefts 307 276 318 246 293 250 Public Assists 239 247 252 254 241 135 Medicals 286 341 352 364 344 349 Driving Under the Influence 203 158 164 237 250 108 Drugs/Narcotics 145 116 140 189 222 185 Domestic Assaults 146 119 116 119 104 105 Other Assaults 88 83 94 72 88 79 Uniform Crime Reports — The following statistics are from the Bureau of Criminal Apprehen- sion (BCA). The Bureau of Criminal Apprehension has the responsibility to collect activity in- formation from the law enforcement agencies throughout the State of Minnesota. Crime data and information submitted by municipal and county law enforcement agencies is collected on a daily and semi -daily basis under the Minnesota CriminalJustice Reporting System program. The data is arranged in two main classifications, Part I crimes and Part II crimes. Part I Of- fenses reflect information on eight "serious" crime classifications, and it is generally referred to as the "Crime Index" measurement. Part II Offenses are represented by twenty "less serious" crime classifications. The eight crimes represented in the Part I Offenses include murder, rape, aggravated assault, robbery, burglary, larceny, motor vehicle theft, and arson. Part II crimes are forgery /counterfeiting, fraud, embezzlement, stolen property, other assaults, vandalism, weap- ons, prostitution, other sex offenses, narcotics, gambling, family /children, DUI, liquor laws, dis- orderly conduct and other offenses. There is agency specific 2009 data available now, but the entire 2009 report is not available until later this year. The 2008 BCA Uniform Crime Report can be viewed in its entirety online at: http: / /www.bca. state.mn.us /CJIS/ Documents/ Crime2008 /2008CrjmeBookRevisedi 0- 09.pd' Crime report at a glance— Lino Lakes Crime rate per 100,000 Part I= 1,074 Part II= 3,150 Combined= 4,224 Summary =The City of Lino Lakes continues to have one of the lowest Part I, Part II, and Combined crime rate of any city in Anoka County. 33 • The breakdown of incidences of Part I and Part II Crimes for the City of Lino Lakes for the last six years that information was available. 2004 2005 2006 2007 2008 2009 Part I Crimes: Larceny 248 198 227 183 238 172 Burglary 43 35 35 49 34 30 Aggravated Assaults 15 8 5 6 11 11 Motor Vehicle Thefts 7 14 20 8 8 9 Robbery 1 1 1 1 1 1 Arson 2 1 1 0 1 2 Rape 1 2 3 3 4 1 Part II Crimes: Vandalism 117 140 116 74 115 100 Driving Under the Influence 135 94 106 165 108 92 Liquor Violations 22 25 54 54 59 30 Weapons 5 14 8 16 5 8 Disorderly Conduct 49 57 56 48 53 67 Assaults 65 54 79 61 67 56 Narcotics 92 65 83 116 128 97 Fraud 35 35 49 51 55 61 Stolen Property 4 11 7 7 5 8 Forgery/ Counterfeiting 21 10 18 10 12 13 Other Sex Offenses 1 5 3 10 5 9 Other Offenses 95 78 64 59 72 88 34 Lino Lakes Volunteers in Police Service (LLVIPS) LLVIPS promotes the use of funding of LLVIPS and volunteer organizations to aid the Lino Lakes Police in crime prevention initiatives, public education and awareness, disaster preparedness, basic emergency response and provide assistance to professionally trained first responders and disaster victims as requested. VI* S Volunteers jr Police Service 640 Town Center Parkway Lino Lakes, MN 55014 651- 982 -2300 llvips @ci.lino - lakes.mn.us www.ci.lino- lakes.mn.us (under Public Safety) "Strengthening our community through volunteerism" Police Reserve Unit: works to fulfill the mission of the Lino Lakes Police Department by providing a safe community, assisting with aggressively pursuing criminals, promoting crime prevention partnerships, increasing communications, encouraging volunteerism and continuing to enhance and strengthen our community oriented policing philosophy. Explorer Post: provides young adults with an opportunity to "explore" a career in law enforcement and receive training in that career, while at the same time, building a unique relationship between themselves, the adult volunteer leaders, the police department and their community. The Lino Lakes Police Department currently has 123 dedicated volunteers assisting with various public safety, emergency management, crime prevention, and administrative duties. In 2009, the Lino Lakes Police Department Volunteers donated 10,430 hours. VOLUNTEER NOW @ www.ci.lino- lakes.mn.us (under Public Safety) or call 651- 982 -2300 The Lino Lakes Volunteers in Police Services is organized exclusively for nonprofit, public educational and charitable purposes related to volunteer organizations and groups assisting the Lino Lakes police department. LLVIPS is a 501(c)(3) organization seeking contributions to support these Lino Lakes Police volunteer organizations. Your donations are tax deductible. Community Emergency Response Team (CERT): trains citizens to respond to community emergency and disaster situations. CERT's goal is to do the "greatest good for the greatest number of people." Lino Lakes, %IN rJ COMMUNITY EMERGENCY RESPONSE TEAM Public Safety Citizens Commission (PSCC): reviews and analyzes topics of community concern, shares information with the community related to the police department, provides feedback on potential police department improvement initiatives, offers advice on pending policy considerations and are communicators to policy makers on police issues and concerns. Other Volunteer Groups: Several other groups assist in Police functions: Administrative Volunteers assist with data entry, transcription, filing, crime prevention, investigations, property and evidence, special projects, and much more. Chaplains help with death or serious injury notification, personal support, and other follow up assistance to victims of crisis situations. Neighborhood Crime Watch groups, Trail Watch volunteers, and Business Crime Watch groups provide essential support to the police department and serve as an additional set of eyes and ears looking for suspicious behavior. Interns and Service Learning Students assist the department with special projects and crime mapping initiatives. Lino Lakes Volunteers in Police Service (LLVIPS) Donation Form I wish to make a tax - deductable donation of $ to LLVIPS. I would like my donation to be designated to the following volunteer group (Optional): n Reserve Unit Explorers CERT n PSCC *Make checks payable to LLVIPS Name Telephone - Address City State Zip 7 My employer matches charitable contributions. Enclosed is the appropriate form for the LLVIPS. Please contact me regarding other donation opportunities. 71 Anonymous donations can be made directly to Patriot State Bank c/o LLVIPS • • WS — Item # 6 WORK SESSION STAFF REPORT Work Session Item # 6 Date: June 7, 2010 To: City Council From: Dave Pecchia, Chief of Police Re: Replacing vacant Police Officer Position Background Continuation of the discussion on whether to backfill the Police Officer opening created by the promotion of Officer Dale Hager to Sergeant. This is a funded position in the approved 2010 budget. The process for promotion of existing CSO Kristen Wills is substantially complete, the remaining background and medical evaluations are not authorized by state law unless there is a conditional job offer. Requested Council Direction Staff is requesting council direction to either make a conditional job offer or delay. Attachment(s) 1. Financial impact of promoting a current CSO to Full Time Sworn Officer 1 Financial impact of moving a part time CSO to full -time officer on the 2010/2011 budget. Cost of a full time, first year police officer Cost of a part time CSO Difference State provides $7,132 per officer bringing the difference to ($43,623 - $7,132436,491) $70,532 $26,909 $43,623 $36,491 State provides an additional $350 for training making the final difference $36,141 The difference in cost between a full time police officer and a full time CSO: Cost of a full time, first year police officer $70,532 Cost of a full time CSO $53,818 Difference State provides $7,132 per officer bringing the difference to $16,714 $9,582 State provides an additional $350 for training making the final difference $9,232 Additional savings not included in original 2010 budget: Two months of Officer Hagert's salary* $13,134 HSEM Grant $10,000 Funding from Ramsey County Violent Offender Task Force $15,000 Total savings /additional revenue for 2010 $38,134 * this is just for two months of her salary, she thinks she will have another two months of military leave in 2010 making the savings on her salary approximately $26,268 2011 savings on Officer Hagert's salary $65,670 • • • • • • WS — Item 7 WORK SESSION STAFF REPORT Work Session Item 7 Date: Council Work Session, June 7, 2010 To: City Council From: Michael Grochala, Jim Studenski Re: Signal Justification Report Update Background TKDA has completed the draft Signal Justification Reports (SJRs) for the following two intersections: 1) Birch Street /Ware Road 2) Lake Drive /Main Street Staff has met with Anoka County to discuss the two projects and information requirements. Anoka County is the roadway authority and their approval is required for installation of signals. The draft reports have been forwarded to the County for their final review. Based on the draft reports, the intersection at Lake Drive and Main Street meets signal warrants based on existing traffic volumes and is likely to be approved. The Birch/Ware Road study failed to meet warrants based on existing volumes but does appear to meet warrants based on future conditions. These conditions include increased future traffic volumes on; 1) Birch Street and Ware Road; 2) Right -in Right -out access modification to Hokah Drive; 3) Extension of Sioux Lane to Hokah Drive; and 4) future residential development north of Birch Street between Hokah Drive and Rice Lake Elementary. Also taken into consideration is the Rice Creek North Regional Trail which will be constructed this summer. A final determination on whether the signal systems are warranted is pending completion of Anoka County's review. Based on the results of the reports, staff will be requesting council authorization to prepare feasibility studies for the project(s) at the June 14, 2010 City Council meeting. A determination on the scope of improvements, estimated cost, and cost sharing, if any, will need to be completed by August. Any proposed questions to be placed on the 2010 General Election ballot need to be submitted to the County by August 19, 2010. 1 Council Direction • Staff is requesting council direction to place authorizing preparation of a feasibility study for both intersections on the June 14, 2010 regular council meeting agenda. • 2 • • • WS — Item 8 WORK SESSION STAFF REPORT Work Session Item 8 Date: Council Work Session, June 7, 2010 To: City Council From: Michael Grochala Re: Comprehensive Plan Review Background The City Council passed Resolution No. 09 -23 adopting preliminary approval of the 2030 Comprehensive Plan for submittal to the Metropolitan Council in June of 2009. The council action included the following changes to the draft plan: • Modification of the Comprehensive Plan forecasts resulting in the reduction of the cumulative 2030 household forecast by a total of 2,000 units. Accordingly, the change resulted in the City's affordable housing goal being reduced from 1.275 to 560 units. • Modification of the Staging Plan to more closely monitor growth by dividing the 10 year staging areas into five year phases. • Modification of residential development densities as follows: • Low Density Residential 1.5 — 3.5 units per acre (no change) • Medium Density Residential 3.6 — 6.9 units per acre (instead of 3.6 to 7.9) • High Density Residential 7.0 — 12.0 units per acre (instead of 8.0 or greater) The revised plan was submitted to the Metropolitan Council in August of 2009. At the request of Metropolitan Council supplemental materials were submitted in October and the plan submittal was determined to be complete. The plan was reviewed by the Metropolitan Council's Environmental Committee and Community Development Committee in November. On December 9, 2009 the Metropolitan Council completed its review of the Lino Lakes 2030 Comprehensive Plan update. The Council adopted the following actions: 1. Authorize the City of Lino Lakes to put its 2030 Comprehensive Plan Update into effect. 2. Adopt the revised population and employment forecasts. 3. Advise the City to: 1 a. Continue to participate in the Council's Plat Monitoring Program b. Implement the advisory comments for Transportation, Surface Water Management, and Water Supply. 4. Approve the City of Lino Lakes Tier II Comprehensive Sewer Plan. The Metropolitan Council approval also included advisory comments which are attached to this report. The transportation comments are being addressed by staff and consist of minor corrections. The other comments are merely advisory. The City has included funding in the 2010 budget for updating the Surface Water Management Plan. Staff will provide an overview of the plan at the work session. Council Direction Staff is requesting council direction on how they wish to proceed with final approval of the 2030 Comprehensive Plan update. Under state law the city must formally adopt the comprehensive plan within nine months of the Metropolitan Council's final action. The City cannot adopt a modified plan without prior review and authorization from the Metropolitan Council. Proposed changes, if any, will need to conform with regional plans and be coordinated with Metropolitan Council. It is likely that minor text changes i.e., goals and policies that are local in nature and remain consistent with or do not impact regional plans, can be administratively approved. Major changes such as modifications to the land use plan will be a major undertaking and require full review and approval by the Metropolitan Council. These types of changes would require remodeling of both the transportation system, sanitary sewer and water systems. This is both an expensive and time consuming process. Staff would recommend that any changes of this type be reviewed and evaluated as a separate comprehensive plan amendment after formal adoption of the 2030 update. Attachments 1. Metropolitan Council Advisory Comments 2 • • Attachment 1 Metropolitan Council Advisory Comments The Metropolitan Council's advisory comments included the following: Under Transportation: The City needs to be aware that the City's proposed functional classification system (Figure 6 -6) should be submitted to the Transportation Advisory Committee (TAC)- Planning Committee for approval. The following are minor technical corrections and updates regarding the transit system plan: 1. All references to route 255 need to be deleted, as Route 255 was discontinued in June 2009. 2. The Transit Service and Facilities map (Figure 6 -16) should show route 275 extended via County Road 14 to Lino Park and Ride and Lino Lakes City Hall Park and Ride in downtown. Service was suspended during the reconstruction of County Road 14, but it has been restored. 3. Table 6 -7: Lino Lakes Transit utilization to /from Minneapolis and St. Paul seems to describe transit usage by the entire population of Lino Lakes to Minneapolis and St. Paul. LEHD data shows the transit mode split of only that portion of the City's population that works in the downtowns and uses transit to commute. 4. The Transit Passenger and Support Facilities section should add the Lino Park and ride and the Lino Lakes City Hall Park and Ride in downtown. 5. The Park - and -Rides section describes a planned 600 -space Park and Ride at I -35E and CSAH 14. The anticipated capacity of this facility has been reduced from 600 spaces to 200 spaces. Under Surface Water Management: 1. The Rice Creek Watershed District has recently submitted their revised water shed management plan to the review authorities. The City should be aware that it will need to update its Surface Water Management Plan and submit it to the Council and to the watersheds for review for approval within two years of the Watershed District's plan being approved. Under Water Supply: 1. The Council encourages the City to continue to promote wise water use with its customers through conservation education messages and programs. 3 • • • WS — Item 9 WORK SESSION STAFF REPORT Work Session Item 9 Date: Council Work Session, June 7, 2010 To: City Council From: Michael Grochala Re: Charter Commission 2008 Charter Amendment Proposal Background At the May aid, 2010 City Council work session staff was directed to distribute information relating to the Charter Commission's 2008 Charter Amendment proposal. The purpose of the proposal was to amend Section 8 of the Charter relating to public improvement projects. A significant amount of discussion and review was undertaken in 2008 by the city council related to proposed amendment. It was noted during these discussions that from a legal standpoint the existing charter language would be preferable to the Charter Commission proposal. Mr. Steve Bubul, the City's Bond Consul, previously prepared a report regarding the proposed amendment. A copy is attached. Mr. Bubul, at council's request, also prepared a comparison of special assessment rules, including state statue, existing charter, and the charter commission proposal. Council Direction None Required. Information Only. Attachments 1. Charter Commission 2008 Charter Amendment 2. Bubul review of Amendment, Jan. 28, 2008 3. Bubul narrative comparison of amendment alternatives, Feb. 18, 2008 4. Bubul grid comparison of amendment alternatives, Feb. 19, 2008 5. LMCIT Risk Management Memo March, 28, 2007 6. March 3, 2008 Work Session minutes 1 • The Lino Lakes C1- tr Commission has complete its review of Ordinance 07 -07, proposing amendments to Chatter Chapter VIII, Public Improvements and Special Assessments. We understand the concerns being raised by the City Council. Rather than simply approve or reject the Council proposed amendment, we have prepared a substitute amendment that we believe sties a better balance between the concerns of the City Council and the concerns shRred by early Lino Lakes residents. We p1Go recognized the opportunity to clean up confusing language, clarify procedures, and generally make Chapter vm of the Charter more readable and useful to everyone. Attached is the substitute amendment proposed by the Charter Commission. The most simificant provisions are as follows: I. A referendum is no longer required for a road reconstruction project. When a project would be paid for out of the general revenue fund, taxpayers may petition for a referendum. This preserves the rights of the taxpayers to stop projects, while also requiring that enough taxpayers sign a petition. Special assessment projects may be initiated in three ways. One, if all the property owners agree to pay all of the cost of the project, as in the existing C Rr ter, the City Council may approve the project just as described in state law. Two, if more than 25% of the property owners (but less than 100 %) petition for a project, the City Council may order a feasibility study by a 3/5 majority. Three, the City Council itself may initiate a project by a 4 /5- majority vote. 3. After the feasibility study is done, notices are sent to the affected property owners with enough detail to let them 1mow how the public improvements will change the look and use of property around them, and an estimate of their special assessment_ 4. The feasibility study will need to include alternatives, so that the residents and the City Council can see what it would cost to do some, rather than all, of the project. Those alternatives also would be included in the information sent to the R ected property owners. 5. Propeity owners would be given a chance to indicate which alternative they prefer. Rather than building or rejecting an entire project, this will gve the City the flexibility to do special assessment projects approved by the neighborhoods. The Charter Commission respectfully recommends that the City Council place this amendment on the ballot in November of 2008. Respectfully submitted., 411 Cori A. Duffy Chair. Lino Lakes Charter Commission • • • SUBSTITUTE AMENDMENT TO CHAPTER RECOMMENDED BY TEE CHARTER CO1�thESION Section g.01. Power to Make Improvements. Subdivision 1. Power. The City may make any type of public improvements not forbidden by law. Subd. 2. Local nature of improvements. AIl public improvements funded in part through either general revenue or special assessments sha11 be primarily designed to give a direct benefit to property currently occupied by residents or businesses in the City. Public improvements primarily designed to open up new areas of the City for development may not be funded in part through general revenue or through special assessments (except as provided in Section g.04, Subd_ 3 below). Section g.02. Relation to State Law. Except as otherwise specified in this Charter, the City shall follow the procedures set forth in state law relating to local improvements and special assessments. Section 8.03. Power to Impose Special Assessments. Subdivision 1. Need a special benefit. The City may impose special assessments to pay for all or a part of the cost of the public improvements when the public improvement provides a special benefit to adjacent or nearby properties, except as provided in Subd_ 2 below. Subd_ 2.. Street maintenance. The City shall not impose special assessments for maintenance of its streets. Maintenance includes overlays, sealcoati g, and other improvements to care for the street surface between the date the street was constructed and the date the street will be reconstructed. Subd. 3. Sanitary sewer connections. When public improvements include sanitary sewers, the City shall not require an adjacent or nearby property to connect to those sewers if the property is served by a properly working private sewage disposal system (e.g., a septic system). The property may be required to connect to the sanitary sewer system when either the private sewage disposal system fails, or the property is conveyeed to a new owner, whichever occurs List. Subd. 4. Uniformity and maximum Special assessments shall be imposed imiformly on similar properties. The special assessment on each property shFi11 not exceed the benefit to that property. Section g.04. How to Initiate Public Improvements for 'Which Special Assessments may be Imposed. Subdivision 1. Policy. The City desires to protect er.i.sting residents and businesses from having to pay special assessments Ior public improvements they do not want Therefore, the process for initiating public improvements is restiicve. Subd_ 2. Three ways to initiate public improvements. Special assessments may not be imposed for public improvements TTnless the public improvements are initiated in one of the ways described in subdivisions 3, 4, and 5 below. Subd. 3. Petition signed by 100 %. The owners of 100% of the property proposed to be specially assessed for public improvements may present a petition to the City Council. The petition shall generally describe the public improvements to be studied, and specifically identify the property proposed to be specially assessed. The petition must be accompanied by an agreement that these owners agree to pay 100% of the cost of the public improvements. Upon receipt of such a petition and agreement, the City Council may adopt a resolution to initiate these public improvements by a simple majority vote. These public improvements need not comply with Section E.01, Subd. 2 above. Aside from the requirements of this subdivision, state law shall govern these public improvements. Subd_ 4. Petition signed by 25% or more. The owners of more than 25 %, but less than 100%, of the property proposed to be specially assessed for the public improvements may present a petition to the City Council. The petition shall generally describe the public improvements to be studied, and specifically identify the property proposed to be specialty assessed_ The City Council may adopt a resolution ordering a feasibility study for these public improvements by a majority vote of all members of the City CounciL In determining whether sufficient signatures are present on the petition, the following four rules shall be followed_ (1) The signers must own at least 25% of the total number of lots proposed to be specially assessed_ For =platted property, each existing parcel of land shall be considered one lot. The owner of a small lot gets one vote, the same as the owner of a large lat. (2) If more than one person owns a particular lot only one signature will be counted for that lot (3) If more than one lot is owned by a person, that person' s signature will be counted only once. (4) If multiple owners of a lot also own an additional lot or lots, only one signature will be counted for all the owners and all their lots. This is intended to keep any one owner from dominating the process. • • • • • Subd. 5. No petition. The City Council may initiate public improvement without a signed petition. The resolution shall generally d. =scribe the public improvement to be studied, and specifically identify the property proposed to be specially assessed_ The City Council may adapt a resolution ordering a feasibility study for these public improvements by the affirmatrve vote of four - fifths all members of the City Council. Section 8.Q5. Feasibility Study. Subdivision 1. Contents. Once public improvements have been initiated under Section 5.04, Sub& 4 or Subd_ 5, the City Council shall direct &twito do a feasibility study. In addition to any requirements under state law, the feasibility study shall contain the following information: (1) a list of the recommended public improvements; (2) changes in the appearance or use of property, such as trees to be removed, easements acquired, and new ar changed storm water facilities; (3) the projected cost for the recommended public improvements; (4) a list of the properties proposed to be specially assessed for the recommended public improvements; and (5) an estimated special assessment per lot for the recommended public improvements. Subd_ 2. Alternatives. If more than a single public improvement (e.6., street lights) is proposed, the feasibility study shall include information on alternatives, such as doing individual improvements or doing riifferent combinations of the improvements (e.a., just streets, streets and street lights., streets and curb and gutter, streets and sanitary sewers, etc.). If one of the public improvements is reconstruction or oth.r work to improve an �,isting street, one alternative must be to do only the street The feasibility study shall contain the information listed in Subd_ 1 above for each of the alternative combinations. Section g.06. Public Hearing. Upon being notified that staff has completed its feasibility study, the City Council shall adopt a resolution scheduling a public hearing on the proposed public improvements. The healing shall be scheduled for a date at least two weeks away. In addition to the requirements in state law, the notice of the public hearing That is sent to the property owner shall be sent by certriled mail, and shall include the information described in Section &115. Se^tion a.07. Indication of Preferences. Subdivision 1. Waiting period After the public hearing, there shall be a period of at least 60 days prior to the net City Council action on the proposed public improvements. Property owners proposed to be specially assessed are given. this 60-day period so that they may indicate their preference regarding the proposed public improvements. Each indication of preference shall be in writing, signed by the praprr owner, and state whether the property owner prefers all, a specific ant of the alternative cambinabon.s, or nave of the recor-r n nded public improvements. Subd_ 2. preferences counted. Property owners who sieved a petition to initiate the public improvement shall be considered to have indicated a preference for all of the public improvements described in the petition., -finless they indicate a different preference during the 60- day waiting period_ The restrictions on who may sign a petition, described in Section 8.044, Subd_ 4 above, also apply to determine who may indicate a preference. If multiple owners of a lot or lots indicate different preferences, no preferences shall be counted for that lot or lots. Subd. 3. Utilities in streets. Some utilities typically are installed during street improvements, which usually costs less than constructing the street and utilities separately. If propeerry owners prefer an alternative which results • in a street being improved without u;iTsties recommended by star, then the utilities may not be installed in that street within five years after completion of the street, -finless the installation of utilities and any related street repair will be paid for without using any of the City's general revenue. Section 8.08. City Connriil _4caon. Subdivision 1. _Approval of preferred alternative. At the first regular City Council meeting occurring ate the 60-day period ends, the City Council shall approve the alternative which was preferred by the largest number of property owners. If the largest number of property owners indicated a preference that none of the recommended public improvements be constructed, then the City Council shall not approve any of the proposed public improvements. Subd. 2. Second waiting period. If the preferred alt. - native is to have some or all of the public improvements constructed, then there shall be a period of at least 60 days between the day the City Council approves the preferred alternative and the date of the next City Council action on the proposed public improvements. Taxpayers are given this 64 -day period so that they may petition for a referendum as provided in Section 8.09 below. Section 8.09. Taxpayer Referendum. Subdivision 1. Petition. when a proposed public improvement is to be funded in part throe h gentlial r °venue, the taxpayers of the City may, petition for a referendum on the public improvements. Any reOstered voter may sign the petition for a referendum. To Eiger a referendum, the number of valid Ric:matures on the petition must equal or exceed 12% of the number of votes cast for mayor in the last mayoral election. • • • • • Subd. 2. Timing. Friar to the first regular City Council meeting occuTing after the end of the 60-day period described in Section &.Q &, Sabi. 2, the tr ay s must submit their petition for a referendum to the City. If the petition is not submitted prior to that meeting, or does not have sufficient valid signatures, no referendum is required_ If the petition is timely submitted., with suaicient valid sip-natives, the City Council shall order the public improvements to be placed on the ballot at the next general or special election_ Subd.. 3. Voting. The ballot shall ask voters if they want to use general tax dollars to pay for a portion of the described public improvements. The actual ballot language shall give a general description of the public improvements proposed to be constructed.. Subd_ 4. public improvements rejected. If a majority of those voting on the issue are opposed, the City Council shall not proceed with the proposed public improvements. The City Council may not initiate the same or substantially similar public improvements within the net 12 months. Sub& 5. public improvements approved- When proposed public improvements are allowed under Subd. 3, the City Council shall adopt a resolution approving the public improvements.. If, after bids are received on the public improvements., the proposed contract exceeds the estimates described in Section &.Q5 above by more than ten (1 D %) percent, the City Council may not award the contract for the proposed improvement The City Council- may rebid the public improvements once. Section &.1 Q. Specified Commercial Area Subdivision 1. Not as restricted_ The area described in Subd. 2 below is not subject to the restrictions set forth in Sections &.04 through. &.09 above. However, certain single family residences are protected in this area as indicated in Subd. 3 below. Subd. 2. Area deso iption. This is an area generally lmown as the intersection of Interstate 35W and Trunk Highway #49 (Lake Drive). More specifically, this area is described as follows: - the north one half (1/2) of the southwest quarter (1/4) of Section 1g; and - that part of the south one half ("A) of the southwest quarter (1/4) of Section 1 & lying north of the Int�terstate 35W rigat -of way, and - that part of the southwest quarter (1/4) of Section 17 lying west of the Trunk Highway #49 (Lake Drive) right -of -way, and - all of the northwest quarter-(1 /4) of Section 17, except that part of the southeast quarter (1/4) of said northwest quarter (1 /4) of Seddon 17 described as follow: beeinning at a point at the intersection of the south line of said southeast quarter (1/4) of the northwest quarter (1/4) with the east right -of -way line of Trunk EIighway #=49; thence northeasterly along said right - of-way line 935.14 feet (+ or -) ; thence so7Ttheast°rly 672. 39 feet (+ or -) to east line of said southeast quarter (1/4) of the northwest quarter (1/4); thence south along said east line 5E2,3" feet (+ or -) to the south line of said southeast quarter (1/4) of the northwest quarter (1/4); thence westerly along said south line 1021.59 feet (± or -) to the point of bey-inning; and - the north 720 feet of that part of the southwest quarter (1/4) of the northeast quarter (1/4) of Section 17 lying west cif the Anoka County Park property, and - that part of the north one half (lti) of the northeast quarter (1/4) of Section 17 lying west of the Anoka County Park property, and - the south one half (1/i) of southeast quarter (1/4) of the southeast quarter" (1/4) of Section E; and - the southeast quarter (1/4) of the southeast quarter (1/4) of the southwest quarter (1/4) of Section n; and - the east 330 feet (+ or -) of the northeast quarter (1/4) of the southeast quarter (1/4) of the southwest quarter (1/4) of Section E. Subd. 3. Singe family residences protected. Special assessments shall not be imposed on a single family residence if the residence meets all three of the following criteria. (1) The residence is located within the area described in Subd_ 2 above; and (2) At least ED% of the residence is used exclusively as the owner's residence; and not for a business; and (3) The residence has been owner - occupied since at least September 30, 1993. If the residence was empty between owners, this still counts as owner occupied. Subd. 4. Notice and objection. When public improvements are proposed which would result in special assessments on a single family residence located in the area described in Subd- 2 above, the City shall send a certified letter to the owner of the residence prior to the first public hearing on the proposed public improvements. hs addition to the requirements in state law, the letter shall inform the owner that the owner will not be specially assessed if (a) the owner's residence meets the three criteria in Subd. 3 above (which shall be listed in the letter), and (b) the owner Wives the City Clerk a written statement, prior to the close of the public hearing, that the owner objects to being specially assessed. -6- • • • Subd. 5. Effect of objection. The City shall not assess an owner who submits a sued written statement objecting to being specially assessed, as describe-..d in Subd_ 4, i n1ess the City can prove that the single family residence does not meat the criteria in Subd_ 3 above. Subd_ 6. Later connection. If the public improvements include utilities and the owner connects to one ar mre of those u iiities within five years afMr the eamplenan of DDIStrUZti.D11 of the improvements, then the owner shFill be considered to have consented to being specially assessed for the public improvements. The City may impose the special assessments at that time, in the =aunt that would have been imposed had the owner been specially assessed when the public improvements were constructed_ • C H A R T E R E D Offices in Minneapolis Saint Paul St. Cloud 470 U.S. Bank Plaza 200 South Sixth Street Minneapolis, MN 55402 (612) 537 -9300 telephone (612) 337 -9310 fay: hrtp://www.lcennedy-graven.com Affirmative Action, Equal Opportuniry Employer STEPHEN J. BUBUL Attorney at Law Direct Dial (612) 337 -9228 Email: sbubul car kennedy- araven.com January 28, 2008 Gordon Heitke City Administrator City of Lino Lakes 600 Town Center raikway Lino Lakes, Minnesota 55014 Re: Responses to Charter Commission Amendment to City Charter On July 9, 2007, the City Council of the City of Lino Lakes (the "City ") approved the first reading of an ordinance amending Chapter 8 of the Lino Lakes City Charter. Subsequently, the Charter Commission submitted to the City Council an alternative amendment to Chapter 8 of the City Charter (the "Commission Amendment "). You asked us, as the City's bond counsel, to review the Commission Amendment and report to you regarding any legal or financial concerns we might have with that proposal. My report follows. Section 8.01. Power to Make Improvements. Subdivision 1: This subdivision is a simple statement empowering the City to make any type of "public improvements" not forbidden by law. It is identical to the first clause of the first sentence in existing Chapter 8 of the City Charter. However, the term "public improvements" is not defined anywhere in the Commission Amendment. By contrast, existing Chapter 8 defines the term "local improvement" as any public improvement financed partly or wholly from special assessments. That is, the current City Charter clearly explains that Chapter 8 is relevant to public improvements only if some portion of the cost will be financed with special assessments. The lack of a defined term introduces a significant question about the applicability of the charter to improvements that are not specially assessed, which in turn creates a potential problem for City financing of improvements generally. 327632v3 S.B LNI40 -86 Gordon Heitke January 28, 2008 Page 2 of 13 Subdivision 2. This subdivision heightens concerns raised above about the scope of Chapter 8. I will address the two sentences separately. First Sentence. The first sentence states that all public improvements, whether financed from general revenues or special assessments, "shall be primarily designed to give direct benefit to properly currently occupied by residents or businesses in the City." This Language creates several difficulties. First, it purports to lay down a general principle for all improvements, whether financed by assessments or "general revenues." As such, it suggests that Chapter 8 now governs almost all improvements the City might undertake, including (potentially) parks, public works and city administrative facilities. That result makes little sense, as there is no apparent reason why special assessment rules and procedures should have any relevance to improvements financed without special assessments. (Indeed, Minnesota Statutes, Section 429.021, subd. 3 expressly states that improvements financed without assessments are not governed by that chapter.) This result also raises significant questions about the City's ability to finance any type of improvement supported in part by general revenues: if all such improvements must be primarily designed to benefit currently occupied property, many types of improvements will fail that test (a new fire station is one example). Aside from the problem of scope, the language itself is ambiguous, requiring that improvements financed with "general revenues" be "primarily designed" to give "direct benefit" to property "currently occupied." Each phrase is fraught with difficulty. The term "general revenues" is not defined is it broader than general tax dollars? Does it include utility revenues? When is an improvement "primarily designed" to benefit property? Is the council's intent a factor in the analysis? What is a "direct benefit" as compared to an indirect benefit? A large body of Minnesota case law provides guidance about how "benefit" is determined in the context of special assessments (i.e., by an increase in market value), but these new terms would raise questions about whether some new standard applies under this charter. And if the improvement must benefit properties that are currently occupied by residents or businesses, what happens to property that enjoys an increase in market value but is not "occupied ?" Nor is it clear what the term "currently occupied" means. It could mean "developed with existing improvements," but there are other interpretations. Suffice it to say all these ambiguities would raise questions of fact and interpretation, in turn hampering the ability of citizens, staff and legal counsel to understand and use the Charter. Second Sentence. The second sentence seems to prohibit the use of assessments to finance "public improvements primarily designed to open up new areas of the City for development." As in the first sentence, the key terms are undefined, leaving large questions of interpretation (particularly regarding whether an improvement "opens up new areas" and whether it was "primarily designed" to do so). Further, this sentence goes beyond the arena of special assessments, barring the use of any general revenues for these types of improvements. In effect, the charter would prevent the city from undertaking these types of improvements at all unless funded with resources that are 327632v3 SJB LN144 -86 • • • • Gordon Heitke January 28, 2008 Page 3of13 neither assessments nor the undefined "general revenues." The result would be a significant impailluent of the city's ability to undertake improvements in these areas. A more fundamental question is whether the City Charter may absolutely prohibit special assessments for all or certain types of improvements that would otherwise be assessable under Chapter 429. Minnesota Statutes, Section 429.021, subdivision 3 indicates that when the cost of any improvement is defrayed by special assessments, "the procedure in this chapter shall be followed sinless the council determines to proceed under charter provisions." Clearly, a charter may establish an alternative procedure for carrying out special assessment financing (as the Lino Lakes Charter has done in the current Chapter 8). It is not clear, however, that a charter may supersede the substance of Chapter 429 and flatly prohibit the use of assessments as a financing tool. A full discussion of the relationship between city charters and state law is beyond the scope of this letter. However, in our view Subdivision 2 creates the potential for litigation based on a claim that the charter is preempted by (or conflicts with) state law. Section 8.02. Relation to State Law. This subdivision clarifies that state law "relating to local improvements" applies except as otherwise provided in the charter. However, this subdivision uses the term "local improvements" without definition, while the rest of the Commission Amendment uses the term "public improvements." As noted above, the lack of defined terms creates ambiguity and uncertainty. Section 8.03. Power to Impose Special Assessments. Subdivision 1. This subdivision partially reiterates state law regarding the general rule of special assessments, i.e., they can be imposed only when the improvement provides a "special benefit." The only concern we have is the statement that such special benefit must be enjoyed by "adjacent or nearby properties." As noted above, there is a large body of law about measurement of benefit, and the proximity of a property to the improvement is not always critical in that analysis. Arguably, adding these terms in the charter limits the ability to find benefit where it would otherwise exist under state law (i.e., where the property's market value is increased by the amount of the assessment). As such, this provision could impair the city's ability to undertake certain kinds of improvements, and could also raise the question about preemption by state law (similar to the issue raised under Section 8.01, subdivision 2). Subdivision 2. This provision prohibits the use of special assessments for maintenance (except in the case of a 100% petition). As with the prohibition on assessments for improvements designed to open up new areas of the city, this provision might conflict with or be preempted by state law. Further, reading this provision together with the first sentence of Section 8.01, subdivision 2, the charter leaves almost no authority to undertake street maintenance at all. Section 8.01, subdivision 2 indicates that all improvements funded with general 327632v3 SIB LN144 -86 Gordon Heitke January 28, 2008 ?age 4of13 revenues (even absent special assessments) must be designed to give a direct benefit to property currently occupied. Under Section 8.02, subdivision 2, the city may not assess any property for maintenance, which presumably means that maintenance is not "primarily designed" to provide a direct benefit. As such, this work may not funded with general revenues either. Even if maintenance is construed as "primarily designed" to provide a direct benefit (and thus eligible for funding with at least general revenues), that would apply only to property that is currently occupied by residents or businesses; streets adjacent to unoccupied property could not be maintained unless financed with some revenue source other than general revenues or assessments. The net result, under these two charter amendments, is a significant limitation on the City's ability to carry out routine street maintenance. If the charter inhibits the City's ability to perform street maintenance, the useful life of streets will probably be shortened, full reconstruction will probably be needed more often, and total costs will probably be higher over the long term. Finally, aside from the above obstacles, there is no "bright line" that distinguishes maintenance from reconstruction. Many projects involve some elements of both, even within the same stretch of a street. Determining when a project is "maintenance" that falls under this subdivision would be difficult. Subdivision 3. This subdivision prohibits the city from requiring properties to connect to sanitary sewers if the property has a working private system, unless the system fails or the property is conveyed to a new owner. This provision is similar to policies or ordinances in some cities. My only observation is that by including this language in the charter, the City is precluded from revisiting this policy decision in the future without the cumbersome process of a charter amendment. Subdivision 4. Like subdivision 1, this subdivision partially reiterates state law regarding how assessments should be calculated. However, the reiteration contains two apparent variations from state law. One is the statement that assessments shall be imposed "uniformly on similar properties." Case law on the spread of assessments is well - developed, and generally requires that similar properties are treated similarly. The new phrase may or may not represent a change in law; the intent is not perfectly clear. The other variation is the statement that special assessments not exceed the "benefit," without a qualifying reference such as "in accordance with state law." Under state law, the test is whether a property receives a "special benefit," as acknowledged in Section 8.03, subdivision 1 of the Commission Amendment. Again, it is not clear whether the intent is to follow the standards of state law or to create some new test. Since state law governs all procedures except as otherwise provided in the charter (see Section 8.02), these phrases are not necessary if they are not intended to vary from state law. If these phrases are intended to vary from state law, they are unclear and troubling. Tn our view, the entire subdivision introduces another element of uncertainty that is best avoided. 327632v3 SIB LN14D -86 • • • • • • Gordon Heitke January 28, 2008 Page 5 of 13 Section 8.04. How to Initiate Public Improvements for Which Special Assessments may be Imposed. Subdivision 1. This subdivision describes the city's desire to protect residents from having to pay assessments for improvements they do not want. As such, it is a statement of philosophy and policy rather than a rule or procedure. While broad statements of policy were once common in legislation, they are typically avoided now because they add nothing of legal significance and could have unintended consequences in future litigation. Subdivision 3. This section describes the process for a 100% petition. The only concern relates to the Council's action on receipt of a petition. The subdivision indicates that the council may adopt a resolution to "initiate" the relevant improvements by a simple majority vote. It is not clear what the term "initiate" means. Under Chapter 429, improvements must be "ordered" by the council before bonds may be issued.. Also, since the subdivision also indicates that state law governs these improvements aside from the requirements of this subdivision, the language should be clarified to harmonize better with Chapter 429 (which, for example, calls for a resolution finding that the required number of signatures has been filed with the city). Subdivision 4. This subdivision describes the process for a 25% petition. Our concerns relate to the technical language. First, the language calls for a petition by owners of more than 25% of the "property proposed to be assessed." Under this language, petitioners identify who should be assessed for the subject improvement. However, which properties benefit is a question of fact that must be determined by the city. In Chapter 429, the 35% petition requirement calls for signature by owners of at least 35% of property abutting the named streets. See, Minnesota Statutes, Section 429.031, subd. 3. In the existing Charter, the petition requires signature by 25% in number of the benefited property owners. See City Charter, Section 8.04, subdivision 1. In either case, the required owners are identified objectively, not by the petitioners themselves. The proposed language could lead to the undertaking of improvements that in fact benefit property beyond that identified by the petitioners, and the petitioners may not represent 25% of the actual benefited property. Further, this language could permit manipulation of a petition to exclude certain property in order to reach the 25% requirement. Second, the rules on signature are ambiguous. Clause (1) calls for signers to own at least 25% of the total number of lots to be assessed. The body of subdivision 4 calls for signers to own more than 25% of the property. More importantly, it is very difficult to reconcile the clause (1) statement that signers must own 25% of the lots, with the clause (3) statement that the signature of a person who owns more than one lot will be counted only once. What happens to the "vote" of an owner who owns multiple lots? The dilemma is best explained by an example: 327632v3 SIB LN140 -86 Gordon Heitke January 28, 2008 Page 6of13 Assume the area "proposed to be assessed" contain 100 lots, 77 of which are owned by one person. Each of the remaining 23 lots is owned by a different person. If the owner of the 77 signs a petition, that signature is counted only once. But what does that mean? One possibility is that, even though this person owns 77 lots, he or she gets only one vote out of 100. If 22 of the remaining 23 lots also sign the petition, there are a total of 23 votes out of 100 lots. The petition fails even though the owners of 99 out of 100 lots approve. Likewise, the petition fails if the owners of all 23 separate lots sign the petition but the owner of 77 lots does not. Another interpretation is that when a person owns multiple lots, those lots are "collapsed" into one, and the petition becomes measured by the percentage of owners. In our example, the result would be a total of 24 owners. If the owner of 77 lots signs the petition, that would be one out of 24, or 4.2% of the total. Unless another 5 lot owners sign (in order to reach the 6 votes needed to reach 25 %), the petition would fail even though the owner of 77 lots approves. Or, if all 23 separate owners sign and the owner of 77 lots does not, the 23 would make up 95.8% of the 24 total owners. The petition succeeds even though the signers own only 23% of the actual number of lots. (This is the result under the existing charter as well, but is opposite the result under the interpretation of the proposed amendment described in the previous paragraph). Both interpretations raise questions of fairness, but it is more troubling that the rules are so unclear. As a practical matter, the City would probably need to treat all projects as City- initiated (and thus approved with a 4/5 vote) unless this matter were resolved judicially. Third, clause (4) is simply difficult to understand. It seems to describe a situation where a lot is owned by a group of joint tenants, and the same group owns another lot. In that case, the apparent intent is to clarify that the lots will be treated as one —that is, it will not matter if one owner sign for one lot and different owner signs for a different lot. This result would already be implied by clauses (2) and (3) and could be more easily handled by revising those clauses accordingly. Another interpretation is that this clause describes one lot owned by a group of joint tenants, and another lot owned by some of those joint tenants but also an unrelated party. In that case, this clause might require that the two lots are treated as one, despite the fact that ownership is not identical. In sum, the intent of this clause is unclear, leaving uncertainty about the validity of a petition under this subdivision. Further, the second sentence of Clause (4) is a commentary that is inadvisable in the body of a city charter. Section 8.Q5. Feasibility Study. Subdivision 1. This subdivision describes the feasibility study process for projects initiated by 25% petition or by the Council. We observe one technical problem and one practical. The technical problem is that the subdivision be6ins by stating that the City 327632v3 SIB LN14D -86 • • • • • • Gordon Heitke January 28, 2008 Page 7of13 Council shall direct staff to do a feasibility study "once the public improvements have been initiated" under Section 8.04. However, under Section 8.04 the Council will have already ordered the feasibility study. Section 8.05 suggests that the council must take a second action to order the feasibility study. Moreover, the reference to staff is inappropriate (or requires a definition), as feasibility studies may be undertaken by consultants instead of (or in cooperation with) staff. The practical problem is that the list of items to be included in the feasibility study may not be available at this early stage in the process -- especially clause 2 (changes in appearance) and clause 5 (the assessment per lot). Chapter 429 now requires that the methodology of spreading assessments must be available at the improvement hearing, but the actual dollar amount per lot may depend on many factors that are unknown at the feasibility stage. Subdivision 2. This subdivision calls for the feasibility study to address various alternatives in any case where more than a "single public improvement" is proposed. As in other portions of the Commission Amendment, the major difficulty with this approach is that compliance will be difficult (if not impossible) to determine with certainty. There is no guidance as to what constitutes a "single public improvement," and what combinations or alternatives must be considered. This provision would invite claims that the feasibility study did not describe all possible alternatives or all possible combinations, or that a "single public improvement" was not really single and therefore the alternative scenarios should have been triggered.. If the proposal calls for multiple improvements, and every possible combination must be addressed, the total number of combinations increases almost exponentially —it is possible that literally dozens of options must be addressed, each with a full scale feasibility analysis. A further problem is a mixture of practical and legal concerns. Some alternatives may be literally impossible, financially infeasible or not cost - effective. Examples might include a street -only project where utilities must be replaced, or a utilities -only project that would only be financially prudent as part of a street project. Assuming the provisions of Chapter 429 govern except as otherwise specified in the Charter (See Section 8.02 of the Commission Amendment), the engineer is required to advise whether the proposed improvement is necessary, cost - effective and feasible. The engineer may not be able to make such a certification for all alternatives, leaving a question whether an alternative not so certified should be submitted to the preference process under Section 8.07. Section 8.06. Public Hearing. This subdivision describes the public hearing process after completion of the feasibility study. There are two technical concerns. First, the language mixes specific charter provisions and state law, creating uncertainty as to what rules apply. The language calls for the hearing to be "at least two weeks away," and references a mailed notice, but does not specify a time period for the notice or reference a published notice. Under Minnesota Statutes, Section 429.031, subdivision 1, the notice must be published twice a week a part, and the hearing must be at least three days after the second publication. The mailed notice must be sent at least 10 days before the hearing. To avoid confusion, the notice provisions should explicitly reference this statute 327632v3 SJB LN140 -86 Gordon Heitke January 28, 2008 Page 8 of 13 or describe the rules directly in the charter (including rules on who is an owner for purposes of receiving notice). Second, this subdivision requires that the hearing notice shall contain, in addition to the requirements of state law, all the information described in Section 8.05. However, Section 8.05 describes the contents of and requirements for the entire feasibility study. Literally, this notice provision mislht require that the substance of the feasibility study be included in the mailed notice. This provision would leave doubt about the adequacy of the mailed notice unless the actual feasibility study were mailed to each owner. Such a mailing is possible but would increase the cost of all projects. Section 8.07. Indication of Preferences. Subdivision 1. The presentation of alternatives is problematic for the reasons discussed above under Section 8.05. Further, it is not clear how preferences would be expressed and counted. Does the language mean that owners have only three choices —all alternatives, one specific alternative, or no alternatives? If so, is a vote for two out of three alternatives rejected as invalid? Does a vote for "all alternatives" mean that each alternative gets a vote, which is then added to any individual votes for each alternative? And what if the highest number of votes goes to "all alternatives ?" There is also confusion about the timing for filing of preferences. Subdivision 1 indicates that "there shall be a period of at least 60 days prior to the next Council action." It goes on to say that owners are given "this 60 -day period" to indicate their preferences. However, the Council meeting is unlikely to be scheduled exactly 60 days after the public hearing, and the language does not directly state when the owners must file a preference—presumably, within 60 days after the hearing, but one might also argue that a petition could filed by the date of the council meeting. (See similar problem under Section 8.09) Any requirement for petitions or preferences should clearly state when the action must be taken. Subdivision 2. This subdivision describes additional rules regarding how preferences are counted. The first sentence indicates that owners who signed a petition at the outset (under the 25% petition provision) are presumed to have indicated a preference for "all of the public improvements described in the petition.," unless they indicate a different preference during the 60 -day waiting period. However, the preference procedure is essentially a vote on the various alternatives presented in the feasibility study under Section 8.05. Therefore, it is difficult to understand how a signature on a petition can constitute a vote for a particular alternative developed after the petition was filed. Must a petition be treated as a vote for all possible alternatives, whatever they may be? At a minimum, this provision would complicate the count of votes, and raise questions about the validity of the preference process if the city relied on the original petition as the sole evidence of an owner's preference. 327632v3 STE LN140 -86 • • • • Gordon Heitke January 28, 2008 Page 9ofl3 This subdivision also states that the rules for counting signatures under Section 8.04, subd. 4 apply to preferences under Section 8.07. Section 8.04, subd. 4, clause (3) directs that where a lot has multiple owners, only one signature will count (so the ambiguities discussed under that section carry over into this section). However, Section 8.07 subdivision 2 states that if multiple owners of a lot indicate different preferences, no preferences shall be counted for that lot. These two provisions seem contradictory. It is true that two owners might disagree and file conflicting preferences, and a question then arises about which one to "count" But simply discarding the votes from that lot seems likely to invite challenge. There might be other solutions, but this problem underscores the practical and legal challenges imposed by the "owner preference" voting system (which, to my knowledge, has no precedent in the State of Minnesota). Finally, the preference system is essentially an election, but one without riles regarding the form of the "ballot," the time and place of filing, canvassing of votes, and similar issues. Municipal elections are governed by a large body of statues and rules, designed to address the myriad of problems and disputes that arise in the course of a complex process. The Commission Amendment creates a new election system, without the supporting legal or administrative "infrastructure." As such, the system is likely to generate high legal and administrative costs. Subdivision 3. This subdivision creates a special rule for utilities in cases where "property owners prefer an alternative which results in a street being improved without utilities recommended by staff." In that situation, utilities may not be undertaken in that street within five years after completion of the street unless the utilities and any related street repair are financed without general revenue. Apparently, the intent of this provision is to encourage owners to vote for the most cost - effective improvement, i.e. street improvements that include utilities (at least where that combination is recommended by staff). However, the language leaves many open questions. When are utilities "recommended by staff?" Who constitutes staff? Does the term include consulting engineers? What evidence of a staff recommendation is needed? Would one sentence in a staff memo suffice? If the feasibility study includes an option of streets without utilities (as it must, under Section 8.05, subdivision 2), and the study concludes that such street -only project is feasible, necessary and cost - effective (as Chapter 429 requires), does that constitute a staff recommendation of no utilities? What if the recommendation is qualified in some way? If those hurdles are overcome, when is the street "completed" and what constitutes "installation" of utilities" for purposes of measuring the five -year waiting period? Taken together, these difficulties render this subdivision unenforceable as a practical matter. Further, the opening sentence of the subdivision is another example of editorial commentary that is not appropriate in a charter. The charter is a form of legislation, and comments or explanation should be reserved for background materials 327632v3 SIB LINT) 40 -86 Gordon Heitke January 28, 2008 Page 10 of 13 Section 8.08. City Council Action. Subdivision 1. This subdivision describes the procedure for council approval of the preferred alternative. There are three significant concerns with the language. First, the council acts on the alternative "preferred by the largest number of property owners." This apparently means that an alternative may be approved —or all the alternatives disapproved by a plurality vote of the owners who filed preferences, with no minimum portion of all owners being represented. The effect is that significant decisions about a public project could be made by a small minority of affected owners. Second., the language indicates the council shall approve the alternative with the most votes, which deprives the council of its legislative discretion altogether. The result could be that the council is required to undertake a project that implicates city finances (other than special assessments), perhaps against the wishes of a majority of the elected council and at the direction of a minority of the affected owners (i.e., those who filed their preferences). There is some question whether this system represents an unlawful delegation of legislative power, which conflicts with a fundamental statewide policy and is therefore beyond the authority of a city charter. Third, as noted in the discussion under Section 8.07, there are many questions about who can file preferences and how they are counted. In order to ascertain that an improvement is properly ordered, bond counsel is presented with a significant challenge of both interpretation and factual evidence (requiring detailed review of the petition and preference records, perhaps reaching to review of title to clarify ownership). It may not be possible to conclude without qualification (which is the standard for a bond opinion) that projects under this system are properly ordered and bonds secured by related assessments are validly issued. Subdivision 2. This subdivision calls for a second 60 -day waiting period after Council approval of the project, to allow for a reverse referendum described in Section 8.09. This subdivision contains two significant flaws. First, on its face it applies the reverse referendum process to all projects approved by the Council under Subdivision 1. However, Section 8.09 by its terms applies only when an improvement is funded in part through general revenue. The two provisions cannot be reconciled where a project is financed with special assessments and other funds that are not "general revenues." Second, the subdivision states that taxpayers are given "this 60 -day period so that they may petition for a referendum," implying that a petition must be filed within 60 days after the date of council action on the improvement. However, Section 8.09, subdivision 2 expressly states that a petition must be submitted "[pjrior to the first regular City Council meeting occurring after the end of the 60 -day period described in Section 8.08, subdivision 2." In other words, the filing period is not 60 days, but the period from council approval of the improvement to the date of the next council meeting after expiration of the 60 -day waiting period. This is a technical point, but such imprecision creates confusion for citizens and legal counsel alike. 327637v3 SJB LN340 -86 • • • • • Gordon Heitke January 28, 2008 Page 11 of 13 Section 8.09. Taxpayer Referendum. Subdivision 1. This subdivision states the general rules for reverse referendum. Assuming the conflict with Section 8.08 above was corrected, the petition process applies only when an improvement is funded in part through "general revenue." That term is defined nowhere in the charter, leaving significant questions about when a petition for referendum is called for. Does the term refer only to the City general fund? Or does it mean any revenues without legal limitations on their use (which might include at least portions of specialized funds like water and utility funds). Given the significance of this provision, a more precise definition is imperative. Subdivision 2. This subdivision describes the council action after expiration of the petition period.; confusion about the length of that period is discussed under Section 8.08 above. The only other concern in this subdivision is that if a valid petition is timely filed, the Council is required to submit the public improvements to the voters. This result deprives the council of its legislative discretion to abandon the project or find alternative financing rather than move forward with an election. It is also inconsistent with reverse referenda provisions in other areas of law, where a successful petition simply means that the activity in question may not proceed unless approved by the voters. See, e.g., Minnesota Statutes, Section 475.521 (capital improvement bonds) and Section 412301 (city certificates of indebtedness). Subdivision 3. This subdivision describes the ballot and I have no comments on the language. However, it is important for all parties to understand that the actual ballot is required by state law to contain other information, including the statement "by voting yes on this ballot question, you are voting for a property tax increase." See Minnesota Statutes, Section 275.60. Further, if the election is successful, any tax levy will be made against the so- called "referendum market value" rather than tax capacity. This means that homestead owners pay at a higher rate than for activities that are not subject to referendum (such as special assessment bonds that are secured in part by assessments and in part by tax levies). Subdivision 4. This subdivision indicates that the "City Council may not initiate the same or substantially similar public improvements" within twelve months after an improvement is defeated by referendum. There are two areas of ambiguity. First, it is not clear if this language limits only an improvement initiated by the Council under Section 8.04, subdivision 5, or any improvement financed in part with general revenues (even if initiated by a 25% petition), or even a 100% petitioned project (which is "initiated" by the council under Section 8.04, subdivision 3). Second, the phrase "same or substantially similar improvement" is vague. Is an improvement with a higher or lower cost the same or substantially similar? How much deviation from the prior project is needed to permit initiation before the end of the twelve -month waiting period? Similar language in the existing Charter has proven difficult to interpret, requiring the council to wait for the full period in virtually all cases to avoid questions about the validity of a project initiated earlier. 327632v3 SIB LN140-86' Gordon Heitke January 28, 2008 Page 12 of 13 Subdivision 5. This subdivision describes the final council action on improvements, and imposes limitations on cost increases. The first sentence states that the Council "shall adopt a resolution approving the public improvements" when the proposed public improvements are "allowed under Subdivision 3 " First, this language apparently requires the Council to approve the improvements, which is questionable given that the Council may have prudent reasons even at this step of the process to abandon the project. Second, Subdivision 3 simply describes the ballot, so that cross- reference is confusing. Further, the term "allowed" seems misplaced, as the question is whether a timely petition was filed, and if so whether the question was approved by voters. Confusion could be avoided by-avoiding the introduction of a new undefined term. In addition, this entire subdivision seems to address only projects that are subject to reverse referendum (as it is included only in Section 8.09 dealing with that topic). There is no comparable final action on improvements financed with special assessments and other revenues that are not "general revenues." Argiiably, in those cases Council's final action is the approval under Section 8.08, subdivision 1. However, Section 8.08 subdivision 2 seems to call for subsequent action (though as discussed above, that provision makes sense only in the case of improvements financed in part with general revenue) . To maintain consistency within the Charter (and with state law), final council action should be required for all improvement projects, in the form of a resolution "ordering" the project. Such a resolution is required for bonds to be issued under Chapter 429, so ambiguity about whether such action has occurred must be avoided. Regarding cost increases, the major difficulty is one of practicality. Given the time frames necessary to move from feasibility study to bidding (nearly six months under the fastest track), cost increases may be reasonably expected. It is important to keep in mind that before assessments are levied, a second notice and hearing process must be followed, which gives owners another chance to provide input (and in fact to file legal objections challenging the amount of the assessment). A further observation is that this cost increase provision, like the final council resolution., apparently applies only to improvements that were subject to reverse referendum. This has the odd result of allowing cost increases where assessments are likely to be the largest source of funds (i.e., where costs are paid mostly from special assessments and the balance from non - general revenues), but putting limits on such increase where special assessments might finance only a fraction of the improvement cost (e.g., where only 20% of the cost is assessed and the balance paid by a tax levy). Section 8.10. Specified Commercial Area. Subdivision 1. This section is similar to the provision in the existing Charter that carves out special areas of the city where different rules apply. The existing Charter indicates that those special areas are entirely governed by Chapter 429 (with one exception). However, the proposed revision exempts the special area only from Sections 8.04 to 8.09. 327632v3 S7B LN140 -86 • • • • • Gordon Heitke January 28, 2008 Paze 13 of 13 As such, the significant limitations discussed in Sections 8.01 to 8.03, above, would apply even in the specified area. Subdivision 2. The revision includes only the Lake Drive/I -35 area, excluding two other areas given similar treatment under the existing Charter. The excluded areas would now be subject to all the rules in the amended Charter. Subivision 3. Similar to provisions in the existing Charter, this subdivision grants a special exemption from assessments to certain single family residences located in the special area. We have previously advised the City that the existing provision violates federal regulations that apply if bonds financed by assessments are issued on a tax - exempt basis (because one class of property has the right to "opt out" of the assessment). As a result, any improvement projects financed by assessments in the special area may be financed only with taxable bonds, which increases the cost to property owners and all taxpayers in the city (to the extent the bonds require a general tax levy). The proposed amendment retains this feature, with minor changes. Aside from the fundamental problem created permitting certain owners to opt out, there is some confusion about when a property is considered "owner- occupied." The term is not defined and is not self - evident. The language indicates a residence is deemed owner - occupied if it was "empty between owners," but property always has an owner —what happens when property is empty after the current owner moves out? Does that always count as occupied, or only when the owner expects the property to be sold (or already has a purchase agreement)? Is a residence considered empty if a short-term renter occupies the residence? If a bank has title after foreclosure? These interpretive problems exist in the existing charter and are not resolved by the proposed amendment. CONCLUSION I apologize for the length of this letter, but the issues are many and complex. The City Charter is the City's most important legal document —in a sense, its "constitution" —and amendments should be undertaken with great care. I have not attempted to suggest revisions or corrections for the problems cited. Rather, I have simply attempted to describe the legal and practical problems that, in my professional judgment, appear in the language presented. I will be available for further discussion with the City Council at its work session on February 4, 2008. If you have questions before then, please contact me. SJB urs ubul 327632v3 SJB LN)40 -8S COMPARISON OF ASSESSMENT RULES UNDER CHAPTER 429, EXISTING CITY CHARTER, TASK FORCE PROPOSAL, CHARTER COMMISSION PROPOSAL, AND CITIZEN PROPOSAL Prepared by Stephen Bubul Kennedy & Graven, Chartered February 18, 2008 1. SCOPE /APPLICAPILITY. Chapter 429: Governs the undertaking of all "improvements" "defined in Section 429.021, but only if financed in whole or in part with special assessments. Existing Charter: Substantially same as Chapter 429. Task Force Proposal: Same as Chapter 429. Charter Commission Proposal: The terms "public improvements and "local improvements" are not defined. All public improvements funded in part through either general revenue or special assessments must be "primarily designed to give a direct benefit to property currently occupied by residents or businesses in the City." Section 8.01, subd. 2. The "direct benefit rule" applies to all types of improvements, even where special assessments are not used. However, the balance of the proposal only describes procedures for special assessments, so the procedures for improvements funded by general revenue (without assessments) are unclear. The proposal goes beyond the scope of Chapter 429 and the Existing Charter in three additional ways: (i) prohibits use of special assessments and general revenues to fund improvements "primarily designed to open up new areas of the City for development;" (ii) prohibits use of special assessments for maintenance; and (iii) prohibits City from requiring property to connect to sanitary sewers if served by a properly working private sewage disposal system (with provision for later connection). Citizen Proposal: Same as Charter Commission Proposal. 1 2. MEASUREMENT AND ALLOCATION OF ASSESSMENTS. Chapter 429: Existing Charter: Section 429.051 provides that cost "may be assessed upon property benefited by the improvement, based upon the benefits received, whether or not the property abuts on the improvement." Section 429.061 states that the clerk (with assistance of the engineer or other qualified person), shall calculate the proper amount to be assessed against each parcel, without regard to cash value. Otherwise, the spread of assessments is governed by case law. Generally, property must receive a "special benefit," measured by the increase in market value attributable to the improvement. Generally consistent with Chapter 429. Indicates that the total assessment may not exceed the cost of the improvement, and assessments may not exceed the "benefits to the property." Section 8.01. Task Force Proposal: Substantially the same as Existing Charter. Charter Commission Proposal: Varies from Existing Charter and state law in three ways: (i) As noted above, requires "direct benefit" to property that is "currently occupied." Substantially narrower than state law and Existing Charter. (ii) Requires a special benefit to "adjacent or nearby properties." Section 8.03, subdivision 1. Somewhat narrower than state law and Existing Charter, as benefit may not always depend on proximity to the improvement. (iii) Requires that assessments be imposed "uniformly on similar properties." Possibly narrower than state law and Existing Charter. Case law requires that assessments be uniform upon the same "class" of property, often restated as a requirement that the assessments on various properties be "roughly proportionate" to the benefits accruing. See, e.g., Anderson v. City of Bemidji, 295 NW2d 555 (Minn. 1980). Unclear how courts would interpret the specific language in the Charter Commission Proposal. Citizen Proposal: Same as Charter Commission Proposal. 2 • • • • 3. IMPROVEMENTS INITIATED BY 100% PETITION. Chapter 429: Existing Charter: Petition must be signed by owners of "all real property abutting upon any street named as the location of any improvement," requesting assessment of the "entire cost against their property. Section 429.031, Subdivision 3. No hearing needed, and council may approve by majority vote. Petition must be signed by 100% of the "benefited owners." The improvement may not be approved until after a public hearing (described below). After hearing, another 60 -day waiting period is required before council action unless all petitioners file a second petition to waive 50 of the 60 days. Task Force Proposal: Same as Chapter 429. Charter Commission Proposal: Substantially the same as Chapter 429. Petition must be signed by 100% of the "property proposed to be specially assessed," and must be accompanied by an agreement to pay 100% of the cost of the improvements. No hearing needed, and council may approve by majority vote. Citizen Proposal: Same as Charter Commission Proposal. 4. IMPROVEMENTS INITLk'I'ED BY LESS THAN 100% PETITION. Chapter 429: Existing Charter: Petition must be signed by owners of at least 35% in frontage of the real property abutting streets named in the petition. Public hearing is required (described below), and council may approve by majority vote. If the petition is signed by less than 35 %, or the council itself initiates the improvement, the council must approve by 4/5 vote (after the same hearing process as for a 35% petitioned project). Petition must be signed by 25% "in number of the "benefited owners." Section 8.04, subd. 1. The council may initiate the petitioned improvement by a majority vote. Or, the council may initiate an improvement by a 4/5 vote. In either case, improvements may not be finally approved until after the hearing and petition process described below. Task Force Proposal: Charter Commission Proposal: In counting the number of benefited owners, an owner of multiple parcels can only sign once, and each benefited parcel can only have one signature. Petition must be signed by 35% of the owners of the real property abutting on the streets named in the petition. Public hearing is required as under Chapter 429 (subject to the objection and petition process described below), and the council may approve by majority vote. If the petition is signed by less than 35 %, or the council itself initiates the improvement, the council must approve by 4/5 vote (after the same hearing and petition process as for a 35% petitioned project). h1 counting the number of owners, the same rules apply as in the Existing Charter (Le., owners of multiple parcels sign once, each parcel gets one signature). Petition must be signed by owners of "more than 25 %, but less than 100 %, of the property proposed to be specially assessed." Section 8.04, subd. 4. The council may then order a feasibility study by majority vote. Or, the council may initiate an improvement by ordering a feasibility study, by 4/5 vote. In either case, improvements may not be finally approved until after the hearing and petition process described below. The rules for counting owners are slightly different from the Existing Charter and the Task Force Proposal. As in those other documents, owners of multiple parcels can only sign once, and each benefited parcel can only have one signature. However, the Charter Commission Proposal also indicates that signers must own at least 25% of the total number of lots, and that if multiple owners of a lot also own an additional lot or lots, only one signature will be counted for all their lots. Further, the Existing Charter refers to 25% of the "benefited property owners," while the Charter Commission Proposal refers to 25% of the owners (or lots ?) "proposed to be specially assessed." Citizen Proposal: Same as Charter Commission Proposal. 5. HEARINGS, SUBSEQUENT PETITIONS. Chapter 429: After Council receives feasibility study, public hearing is required with 10 days mailed notice and published notice twice in consecutive weeks, with the second one at least 3 days before the hearing. Council may approve resolution ordering the improvement by the vote 4 Existing Charter: Task Force Proposal: Charter Commission Proposal: • described above) any time within 6 months after the hearing. [4s noted above, this step is not needed for 1 00% petitioned projects.] After Council receives cost estimate (the equivalent of a feasibility study), public hearing required with notice similar to Chapter 429, except contents are more detailed and mailed notice is two weeks rather than 10 days. [This step is needed even for 100% petitioned projects] After hearing, owners have 60 days to file a petition against the improvement (requires at least the same number who petitioned for the project in a 25% petitioned scenario, majority of owners in a council - initiated scenario). If a petition against is filed, owners who favor the improvement may file a counter - petition within the same 60 -day period. If the improvement is not barred by a petition against, Council may by resolution "proceed on the improvement" at any time within a year after the hearing (subject to the referendum requirement discussed below). [This step is needed even for 100% petitioned projects, except that petitioners can reduce the waiting period to 10 days, as noted above.] The hearing and notice requirements are the same as Chapter 429, except that if more than 50% of the owners abutting streets named in the mailed notice file objection at or before the hearing, the council must hold a special meeting at least 45 days after the first one, and must provide at Ieast 10 days mailed notice of that meeting. The council may adopt a resolution ordering the improvement within six months after the date of the special meeting (by the vote described above), but the resolution is not effective for 30 days after adoption. If more than 50% of the affected owners file objections within that 30 -day period, the improvements are not ordered. The Charter Commission Proposal creates a process significantly different from Chapter 429, the Existing Charter and the Task Force Proposal. It contains these elements: (i) If more than a single public improvement is proposed, the feasibility study must include information on alternatives (including combinations of alternatives); and if the improvement consists of street reconstruction, one alternative must be to do only the street. (ii) The feasibility study must include (for each alternative) five listed items in addition to any requirements under Chapter 429. (See Section 8.05, subd. 1) (iii) A public hearing must be held with (apparently) the same notice requirements as Chapter 429, except that the mailed notice must include detailed information about each alternative from the feasibility study. (The notice under Chapter 429 requires a description of the general nature of the improvement, the estimated cost, and the proposed area to be assessed). (iv) After the hearing, owners have 60 days to indicate their preferences for all the proposed improvements, a specific alternative combination, or none of the improvements. (v) The Council must approve the alternative approved by the largest number of owners, and shall not approve any of them if the largest number of owners indicated a preference for none. (vi) If owners indicate a preference for a street improvement without utilities that were recommended by staff, such utilities may not be installed using any City general revenue within five years after completion of the street. (viz) If the owners preferred some alternative (rather than "none "), there is a second 60 -day waiting period for final council action on the improvements. [This period seems to be relevant only for projects funded in part with general revenues, discussed below, but the proposal literally imposes this waiting period on all improvements.] The Citizen Proposal calls for a public hearing that generally follows the rules of Chapter 429, but with a more detailed feasibility study and hearing notice (incorporating most of the language on these topics in the Charter Commission ProposaI). However, instead of the "owner preference for alternatives" system in the Charter Commission Proposal, the Citizen Proposal provides a two -step opportunity for petitions against the improvements: 6 • • • • • • (i) If more than 50% of the owners file a petition against the improvements within 30 days after the hearing, the Council shall not approve the improvements. (This is essentially identical to the petition process in the Task Force Proposal.) (ii) If a street is improved without utilities recommended by staff, then utilities may not be installed in that street using any City general revenue within 15 years after completion of the street. (iii) If a valid petition from the owners is not filed, there is a second 60 -day period to allow for a petition from all City taxpayers. [As with the Charter Commission reverse- referendum, this period seems to be relevant only for projects financed in part from the general fund, but the proposal literally imposes this waiting period on all improvements.) (iv) When the improvement is financed in part through the City general fund, if more than 19% of the registered voters in the last City election file a petition to stop the improvements within 60 days after Council approval, the Council shall not proceed. If a valid petition is not filed, the Council may approve the improvements at any time during the next year. [In the November 2006 election, there were 10,824 registered voters in the City, so 2,057 registered voters would be needed to file a successful petition today.] 6. REFERENDUM REQUIREMENTS Chapter 429: Existing Charter: No referendum required for approval of an improvement. Referendum is required to issue general obligation improvement bonds only if less than 20% of the cost to the City is paid with special assessments. Referendum required if less than 100% of the cost is paid by special assessments, connection charges, or any outside funding sources other than the City general fund. Must submit the proposed improvement, and the assessment formula, to the voters within 120 days after the public hearing. If a majority those voting on the question are opposed, the Council shall not proceed with the improvement. Task Force Proposal: None; same as Chapter 429. Charter Commission Proposal: Reverse referendum only, when an improvement is funded in part through "general revenue." Section 8.09, subd. 1. If registered voters equal to at least 12% of the number of votes cast in the last mayoral election file a petition before the first regular Council meeting following the 60 -day period after the public hearing, the Council shall order the question to be put on the ballot at the next general or special election. If a majority of those voting on the question are opposed, the Council shall not proceed with the improvement. [In the November 2006 election, 2,116 votes were cast for mayor, so 254 registered voters would be needed to file a successful petition today.] Citizen Proposal: None; see taxpayer petition against the improvements described above. 7. COST INCREASE PROVISIONS. Chapter 429: Existing Charter: No express provision limiting cost increases over the amounts estimated at the time of the hearing. However, Section 429.031, subd. 1 (g) provides that the resolution ordering the improvement may not increase the "extent of the improvement" as stated in the notice of hearing. If bids exceed the cost estimated by the engineer at the time of the public hearing by more than 10 %, the council may not award the contract. The Council may re -bid the improvement one time only. Task Force Proposal: Same as Chapter 429. Charter Commission Proposal: Same as Existing Charter. Citizen Proposal: Same as Existing Charter. 8. SPECIAL RULES IN IDENTIED COMMERCIAL AREAS. Chapter 429: Not applicable. Existing Charter: Chapter 429 governs in identified areas around Hodgson Road and Lake Drive; Interstate 35 -E and Main Street; and Interstate 35 -W and Lake Drive. However, owners of single family, owner - occupied units that existed on September 30, 1993 may opt out of any special assessments. This right terminates when an owner - occupied residential unit no longer exists on the parcel. 8 • • • • Task Force Proposal: Charter Commission Proposal: Same as Existing Charter, except that the opt -out for owner - occupied residential units is deleted. That is, Chapter 429 governs without exception in the three areas. Eliminates two of the special areas, leaving only the area around Interstate 35 -W and Lake Drive. Also revises the rules for the single - family opt -out, and applies the new rules on scope and measurement (described in points 1 and 2 above) within the 35- W/Lake Drive special area. Citizen Proposal: Same as Charter Commission Proposal. • • Citizen Proposal Same as Charter Commission Proposal. Proposal. Same as Charter Commission Proposal. Governs imps. paid with assessments or general revenues. No assessments or ono revc O Q Ca u O ,0 Q a; N 7 U on I If 25% of owners (or lots ?), majority vote to initiate. If <25% or council initiated, 4/5 vote to initiate. Task Force Proposal 01 N •ct U W E O\ N U W a, If 35% of abutting owners, majority vote to approve. If <35% or council initiated, 4/5 vote to approve. Existing Charter Same as Ch. 429. owners, assess all cost. Hearing required. 60 -day waiting period (waivable to 10 days). N C al O. U Governs only imps. paid in part with assessments. Roughly proportionate. property, assess all cost. No hearing, majority vote. If 35% of frontage, majority vote to approve. If <35% or council initiated, 4/5 vote to approve. Topic a, R Q p U 1 2. Measurement/ Allocation .. O 41 o o = C c c n. o p• C a> '.N...+ U 0 ° ° o c . y o c a :-4 3 0 o > u. .0 o 0 k C 3 o ° o tl a) o o v o 'ti . 2 a) v3 > w •. ) 0 '� 9, p � m ��'+ ' 'ci! G -° R. > 4, ob v+:-1 0, ,b-o 0.3 05 `•U °`0 o 2 A `' c A to •o .� ca - 3 - ' cc - as Q, Same as Ch. 429; but see petition against, above. Same as Existing Charter. Same as Charter Commission Proposal. Charter Commission Proposal - x cb �■ a a a)' a) ct w o °) a) > a 3 0 °° 0 o R. C O w - a) cat -0 `~ O - > y 3 U eC C", p a) p a) .� ° ;0 •. ,, . tip ?, p a3 >, tees ' U to t1, Q O 'G .o MI a) -C 0 p a) = 0 0 ° o o o If funded in part from general revenue, 60 days for petition to hold referendum. If 12% of votes in last mayoral election file within 60 days, must hold referendum.. Same as Existing Charter. Ch. 429 partly governs in one special area; two special areas deleted. Revised single family opt - out. Task Force Proposal tut o a) y -0 2 W G7 V) Fy a) o r¢n' ,_ y o o •a) U m 3 .S o v� -ems c) o° o kr, y _ o ° 0 a) ^ :E' a) n a) am, o 3 a. J01 04 o o- . a, 3 G Same as Ch. 429. Same as Ch. 429. Same as Existing Charter, except no single family opt - out. Existing Charter 14 a) w 4, b O cat a1 W > 3 42 CI If funded in part from general fund, must hold referendum. Bids can't exceed estimate by >10 %. Only one re -bid. Ch. 429 governs in three special areas. Single family opt - out. Chapter 429 x a) v es 3 A> 0 • et o o 'j -D tt R. MI ° 01 � ,.E ¢ . M ei Z . No limitations. Topic Cr CD CO .7 l r/ 01) 01 . -'l a) a) x a tti 6. Referendum ' 7. Cost Increase 8. Special Areas • • League of Minnesota Cities Insurance Trust TO: Gordon Heitke, Administrator, City of Lino Lakes FROM: Chris Smith, Risk Management Attorney, LMCIT CC: Tracie Chamberlin, Loss Control Manager, LMCIT DATE: March 28, 2007 RE: Street Reconstruction This e -mail is to follow -up on our phone conversation last week. As I understand the issue, under the city's home rule charter, the city must hold a referendum to do street reconstruction, if any city funds are to be used. In other words, unless the city specially assesses 100% of the cost against the property owners, the city must hold an election. As a practical matter, this charter provision has greatly limited the city's ability to do street reconstruction, as the ballot issue rarely receives public approval. In light of this fact, you were seeking information on what steps the city can take to help ensure that it does not get sued because city streets are in poor condition. The first step is to have a street maintenance policy or pavement management program which you said the city has. The city has already rated the condition of all city streets and has developed criteria for street repairs and reconstruction. The most important thing the city can do is to follow that policy. If the policy sets up unrealistic standards that the city cannot meet, then the city should amend its policy. Having a policy and following that policy will entitle the city to discretionary immunity for most claims related to the condition of the city's streets. I have attached the following LMCIT memos which discuss these issues further: What to Include in a Street Maintenance Policy and Why Should You Have Street Maintenance Policies? If you have streets that are in need of reconstruction, then pursuant to your city's charter and your policy, the city should hold a referendum on the issue. How often must you hold an election? I suggest that this question should be answered by your street maintenance policy (if it is not answered by your city's charter). My suggestion would be to hold an election once a year. Although the city could hold more frequent elections, there is also a significant cost factor to holding elections. The cost is an appropriate item for the council to consider when deciding how frequently to hold street referenda. As a side note, I think it would be appropriate for the city's Charter Commission to at least consider removing or amending the referendum requirement for street reconstruction. As a practical matter, it really seems to limit the city's ability to reconstruct its streets, and in the long run may actually increase the costs to the city to maintains its streets. Simply trying to maintain the street for years may end up costing more than reconstructing the streets at an appropriate time. Although one might argue that the city can always assess 100% of the costs to the property owner, that presents another problem. The amount of any special assessment cannot exceed the benefit to the property. In other words, if you assess a property owner $10,000 for a new street, you need to show that the value of the property increased by at least $10,000. It is often hard, if not impossible, to show this increase in market value, and may be subject to expensive litigation. Thus, the city could be stuck in a situation where it cannot legally assess the entire cost and cannot get public approval, effectively making street reconstruction impossible. Because street referenda usually fail in your city, it seems likely that some streets are likely to be in poor condition. That raises an issue of what the city should do to warn of dangerous streets. Again, that question should be answered by your policy. It is probably not possible to warn of every condition. And if you tried to do so, a motorist might sue the city for failing to place a warning device. First, I suggest that a warning should be placed anywhere there is a hidden condition from the motorist. And second, the city based on available resources (i.e., money and employees), should establish in their policy what streets or conditions will receive warnings, perhaps only the streets rated as poor in you pavement management plan. In addition, the city may wish to pay special attention to areas involving complaints or accidents. The city's policy should have procedures for responding to notice of complaints and accidents. If the city ultimately decides that no action is necessary, the city should at least document the situation to show that it followed its policy. I hope that the above information adequately answers your questions. If you need additional information, please let me know. Christopher Smith Risk Management Attorney League of Minnesota Cities Insurance Trust (651) 281 -1269 csmith[c�lmnc.orq • • • • • • 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 CITY COUNCIL WORK SESSION March 3, 2008 APPROVED DATE TIME STARTED TIME ENDED MEMBERS PRESENT MEMBERS ABSENT CITY OF LINO LAKES MINUTES : March 3, 2008 . 5:30 p.m. . 7:45 p.m. : Councilmember Gallup, O'Donnell, Reinert, Stoltz and Mayor Bergeson : None Staff members present: City Administrator, Gordon Heitke; Director of Public Safety, Dave Pecchia; Community Development Director, Mike Grochala; City Engineer, Jim Studenski; City Clerk, Julie Bartell. POLICE UPDATE Police Chief Pecchia reported that the Lino Lakes Police Department assisted a Kansas city police department (on February 29, 2008) in the arrest of an individual accused of an Internet related crime against children. The individual is a janitor at Centennial Middle School. The Lino Lakes Police Department investigated and they do not believe there has been any related problems at the school. CHARTER AMENDMENT — Steve Bubul, Kennedy & Graven, was present and outlined his most recent correspondence regarding clarification of the impact of various charter amendment alternatives on the ability of the city to issue tax - exempt bonds for improvements. Having exempt areas does create differing rights among property owners and therefore the easiest way to deal with the question would be to remove the exempt zones. Mr. Bubul was asked about the possibility of removing the zones from the Charter Task Force proposal. It was noted that historically the exempt zones were established due to the commercial or anticipated commercial nature of those areas, to deal with the few residential properties located therein. Those zones are exempt from the charter provisions and assessments are basically handled under Chapter 429 rules. The Charter Task Force proposal would add a right to those residential properties to opt out of an improvement project, a right they don't have under Chapter 429 rules. If the zones were removed, the ability of those residential property owners to opt out would change but if it is a situation that absolutely does not benefit the property, generally they can and should not be assessed anyway. The council discussed the implication of changes to larger land holders and was informed that there are generally deferment provisions on undeveloped land. The Mayor noted that the council will need to move in some direction if there is a desire to forward a charter amendment to the voters this fall. CITY COUNCIL WORK SESSION March 3, 2008 APPROVED 1 There was a short review of the discussion of the February 27 work session and 2 discussion to date on all the amendments. It was noted that there was not a clear reaction 3 of the Charter Commission but a commission member did ask what could be changed in 4 the Charter Commission proposal to make it workable. It was identified that, from a 5 legal standpoint, the existing Charter language would be preferable to the Charter 6 Commission proposal which would actually make it harder to fix roads in the city. 7 Regarding the Task Force amendment, it would conceivably make the improvement 8 process easier because it incorporates many of the elements of Chapter 429 but it also 9 includes the element of allowing benefited property owners to stop a project. The 10 requirement for a referendum is removed in both proposals. 11 12 It was clarified that when the Citizens Task Force approved their proposal, the vote was 13 unanimous. 14 15 A council member asked about concern that changing the charter language dilutes the 16 citizens' ability to participate in public improvement decisions; Mr. Bubul suggested that 17 could be a concern but also pointed out that Lino Lakes is basically one of only two cities 18 in the state that has charter provisions like the current (the other is Mounds View that has 19 a reverse referendum). 20 21 It was clarified that the implication of utilizing tax exempt versus non - exempt bonds 22 would be a significant cost difference. 23 24 It was opined by Mr. Bubul that the council couldn't send an amended version of the 25 Task Force proposal and still maintain the right to put the original proposal on the ballot. 26 27 On the question of removing the exempt zones, city staff indicated that the impact is 28 basically monetary on both the city and those assessed. The council discussed the 29 sensibility of removing the zones based on the change of the affected areas from the 30 1990's when the zones were created. They looked at possible objections from the few 31 residential properties that are included. Under the current Charter provision, the property 32 owners can opt out on their own. Under the Task Force proposal, they have no special 33 opt out because they would fall under Chapter 429. The council reviewed the maps 34 indicating how many properties could be impacted. 35 36 It was clarified that under the Task Force proposal, the city would remain one of only 37 two cities in the state that allows the affected property owners to petition out. The Task 38 Force proposal also includes a process to bring the city and the property owners together 39 before the final decision. 40 41 Staff was directed to draft a new ordinance for consideration by the Council on March 42 24, 2008. The ordinance should be the Task Force Proposal minus the exempt zones. 43 • • • WS — Item 10 WORK SESSION STAFF REPORT Work Session Item 10 Date: 7 June 2010 To: City Council From: Dan Tesch, Director of Administration/Interim C.A. Re: Joint Meeting with the Charter Commission - 8 July 2010, 6:30 p.m. Background In October 2008 the City Council was presented with a written request from The Citizens for Safer Roads to conduct an audit of the practices of the Lino Lakes Charter Commission. An audit was conducted in early 2009 — I am enclosing the audit as we have two council members who were not on the council when this was presented. Since that time the council has committed to meeting with the Charter Commission to discuss a number of on -going issues. We have outlined the following: 1. Appointment Process: The commission chair currently asks to receive all applications for appointment and turn them into the appointing authority (district judge). The City Clerk has asked to receive copies of all applications and correspondence but the statute doesn't require it and so far the commission has not shared this information. 2. Charter Commission Operating Guidelines — what they can and cannot do. 3. Charter Commission Bill Paying Guidelines. 4. Data Practices — who is the Responsible Authority for the Charter Commission and where are documents maintained. 5. How do we communicate to residents about the Charter Commission and how the city charter works. 1 6. Televising of work sessions, Open Mike, and Charter Commission meetings. 7. Note regarding bill paying, there is an outstanding attorney bill from Karen Marty in the amount of $1644.30; 8. At the May 3, 2010 work session, the council requested that the matter of a possible referendum for two stop lights (Main & Lake; Ware Rd & Birch St) be included on the agenda for the joint charter /council meeting. 9. The council had discussed having a League of Minnesota Cities representative (Rachel Carlson) involved in discussions with the commission. Is the council still interested in this? 10. Would the council like staff to contact the Charter Commission for additional items? Requested Council Direction 1. Council should direct staff to prepare an agenda for the joint meeting. Attachment(s) 1. Audit Report 7 • • • • SSeverson, Sheldon, Dougherty a Molenda, P.A. EVERSON SHELDON © M Attorneys I Advisors MEMORANDUM TO: Dan Tesch, Director of Administration FROM: Michael G. Dougherty DATE: April 6, 2009 RE: Investigation of Charter Commission Materials Our office has been asked to issue an opinion regarding certain activities undertaken by the City of Lino Lakes Charter Commission. These activities were taken in association with a question placed on the municipal ballot at the general election on November 4, 2008. In the performance of these activities, the Charter Commission incurred expenses which were then directed to the City of Lino Lakes for payment. ACTIVITY • In October 2008, the Charter Commission contracted with Summit Printing, Inc. for the production of 6,500 flyers. A banner on the flyer appears as follows: Vote "No" to KEEP Your RIGHTS Vote "yes" t • •. ive them up The flyer directed the reader to www.linocharter.org for more information and further stated that the flyer was prepared and paid for by the Lino Lakes Charter Commission. • In October 2008, the Charter Commission contracted with Mailing Solutions for the purposes of mailing 6,481 flyers to addresses in Lino Lakes. • In October 2008, the Charter Commission contracted with PoliGraphics for the production of fifty two -sided printed lawn signs. Each lawn sign contained the following message per side: www LinoCharter.org KnowYOur Rights The lawn signs contained the following: "Prepared and paid for by the Lino Lakes Charter Commission, 600 Town Center Parkway, Lino Lakes, Minnesota 55014 ". • www.linocharter.org is a Web Site/URL that carries a banner that reads "Lino Lakes Charter Commission ".1 In October of 2008, the Home Page of the Web Site contained the following language: On November 4, citizens of Lino Lakes will be presented a ballot question to determine how road widening, reconstruction, city utility expansion and other public improvement projects will be managed. Under the provisions of Chapter 8 of the current city charter, citizens enjoy certain rights for assessable projects that will be lost should the ballot issue pass. The material on the Web site contains the following notation: Copyright 2008. Lino Lakes Charter Commission. All rights reserved. While the Web site contains many "pages," the majority of the content centered around the theme that in Lino Lakes, the only measure currently in place that allows voters to restrict tax increases imposed by the City Council is in Chapter 8 of the Lino Lakes City Charter. An example of such content is the following: "If the charter amendment passes, all citizen input will be surrendered to the City Council... the checks and balances offered by the current city charter would be null and void." AUTHORITY OF THE CHARTER COMMISSION The existence of a charter commission is conferred by the state legislature. The commission's only powers are those expressly conferred by statute or implied as necessary to aid in those expressly conferred powers. The charter commission has no authority to undertake any action without the existence of enabling legislation to support such activity. In other words, the charter commission has no inherent power. The charter commission's expressed powers are only found in Chapter 410 of the Minnesota Statutes. The powers of the commission enumerated in Chapter 410 are as follows: 1 The cost of operating and maintaining the Web Site were not directed to the City of Lino Lakes for payment, and are not further addressed in this opinion. 2 • • • • • • Make rules with reference to its operations and procedures — Section 410.05, subd. 2 • Submit to the chief judge of the district court each year an annual report and forward a copy of the report to the clerk of the city — Section 410.05, subd. 2 • May submit to the court the names of eligible nominees to be considered in making appointments to the charter commission — Section 410.05, subd. 3 • To meet at least once each calendar year and upon presentation of a petition — Section 410.05, subd. 4 • May discharge itself by a vote of % of its members — Section 410.05, subd. 5 • May employ an attorney and other personnel to assist in framing such charter, and any amendment or revision thereof, and direct the reasonable compensation and the cost of printing such charter, or any amendment or revision thereof, to be paid by such city — Section 410.06 • Deliver to the clerk of the city either (1) its report determining that a home rule charter for the city is not necessary or desirable, or (2) the draft of the proposed charter — Section 410.07 • Any time before the council has fixed the date of the election upon the proposed charter, the charter commission may recall it for further action — Section 410.10, subd. 1 • If any charter so submitted be rejected, it may propose others until one is adopted — Section 410.10, subd. 4 • May propose amendments to a charter and shall do so upon petitions of voters — Section 410.12, subd. 1 • Modify or approve any summary of a proposed ordinance — Subd. 410.12, subd. 1 • Transmit petitions for charter amendments to the city council — Section 410.12, Subd. 3 • Review for approval or rejection any city council proposed amendment or to suggest a substitute amendment and notify the council of any action taken — Section 410.12, subd. 5 A review of the activities undertaken in October of 2008 begins with the purpose of the action and the authority to support it. The October activities particularly consisted of the Commission contracting for the production of communication material (e.g. flyers and lawn signs). The expressly conferred powers of a charter commission, as set forth above, do not include the authority to contract for flyers and/or lawn signs. Moreover, the contracts for the material are unnecessary to aid in the carrying out of an express power. In analyzing the authority of a school district to pay for literature concerning a levy referendum, the Minnesota Attorney General opined that from the school board's express authority over the "care, management and control" of school district business, the board had an implied authority to provide factual information to the public regarding the effect the vote would have on the "care, management and control" of the district. Unlike a school board or city council, a charter commission is not charged with the management and control of public property or public employees or city business. The legislature has not enabled the charter commission with a general set of public powers.. In 2005, the Minnesota State Auditor's Office was asked to opine on the design and distribution of a flyer by a charter commission. The Auditor, citing to the Attorney General's opinion, stated that the charter commission lacked authority to produce and distribute an educational flyer. The Auditor stated that a charter commission has a narrowly limited statutory purpose. That purpose is to draft and present the charter or any amendments to the city. INFORMATIONAL MATERIAL VS. ADVOCACY As previously noted, unlike public entities charged with management and control of public assets, the charter commission has no express or implied authority to create communication, flyers or lawn signs. Notwithstanding the issue of authority, no public entity, including a charter commission, may advocate for the passage or defeat of a local ballot question. While every action of the charter commission must be legislatively supported, such actions must also have a proper public purpose. The Minnesota State Attorney General's office and the Minnesota State Auditor's office have each authored opinions that there is no public purpose for a public entity to take a position on a ballot question. Additionally, each office has clearly asserted that public funds may be not be used to advocate for the adoption or rejection of any ballot question and by extension local government units may not give money to an organization to advocate or campaign for or against a ballot question. The conduct of a campaign by governmental entities before an election for the purpose of influencing the voters is not the exercise of any legitimately proper legislative power. Public funds may not be used in support of only one side of any election issue. Any such activity is beyond the role of government. "Vote No to KEEP Your RIGHTS. Vote yes to give them up." There can be no clearer example of advocacy literature that fits the prohibition articulated by the Minnesota State Attorney General's office and the Minnesota State Auditor's office. Similarly, while less discerning than the direct language found in the flyer, the lawn signs coupled with the Web Site2 clearly contain prohibited advocacy. FAIR CAMPAIGN PRACTICES Under Chapter 211B of the Minnesota Statutes — Fair Campaign Practice, political purposes is defined as "an act intended or done to influence, directly or indirectly, voting in a primary or other election." Minn. Stat. §211B.09 states that an employee or official of the state or of a political subdivision may not use official authority or influence to compel a person to apply for membership and/or become a member of a political organization, to pay or promise to pay a political contribution, or to take part in a political activity. In her Statement of Position made in 2008, the Minnesota State Auditor referred to these statutes while noting that Minnesota's Campaign Practices law appears to prohibit public officers and employees from approving the 2 We note that the Web site contains a statement that the Web site is 100% paid for through volunteer contributions by members of the Lino Lakes Charter Commission. However, there can be no doubt that the Web Site belongs to the Commission as evidenced by the style, title, use of the Commission's name, and more importantly through the copyright in the name of the Commission. 4 • • • • • • expenditure of funds for ballot issue advocacy. The Auditor's concern statement would appear to apply to the entering into contracts for the production and distribution of materials for ballot issue advocacy. As clearly noted on the materials, the flyer and lawn signs indicate that they were prepared and paid for by the Lino Lakes Charter Commission. PAYMENT OF CHARTER COMMISSION'S EXPENSES The City Council also asked for direction regarding the charter commission expenses for which it is obligated to pay. The sole applicable provision of Minnesota law is: Minn. Stat. § 410.06 Compensation; expenses The members of such commission shall receive no compensation, but the commission may employ an attorney and other personnel to assist in framing such charter, and any amendment or revision thereof, and the reasonable compensation and the cost of printing such charter, or any amendment or revision thereof, when so directed by the commission, shall be paid by such city. The amount of reasonable and necessary charter commission expenses that shall be so paid by the city shall not exceed in any one year the sum of $10,000 for a first class city and $1,500 for any other city; but the council may authorize such additional charter commission expenses as it deems necessary. Other statutory and charter provisions requiring budgeting of, or limiting, expenditures do not apply to charter commission expenses. The council may levy a tax in excess of charter tax limitations to pay such expenses. The first sentence of this statute provides authorization for the charter commission to employ an attorney and other personnel to assist in framing the charter and any amendment. This sentence also provides that the reasonable compensation and cost of printing the charter shall be paid by the city when so directed by the charter commission. The second sentence of the statute caps the City of Lino Lakes' liability for the charter commission's reasonable and necessary expenses at $1,500.00 per calendar year; but it allows the City of Lino Lakes to authorize the payment of additional legitimate charter commission expenses as the City Council deems necessary. Minn. Stat. § 410.06 has not been the subject of any reported lawsuits.3 However, the section has been the subject of interpretation by state agencies and most recently by the Dakota County District Court. The interpretations can be distilled as follows: • The City (Lino Lakes) has no obligation to pay any charter commission expenses in excess of $1,500.00 per year. • Should the Council decide to pay charter commission expenses in excess of $1,500.00 per year, the Council must deem such expenditures as necessary. • The reasonable amount of any compensation paid to an attorney or other personnel is a determination to be made by the charter commission. 3 Published cases by the Minnesota Court of Appeals or the Federal Court System. • The charter commission expenses to be paid by the City must solely relate to: (1) the employment of an attorney and other personnel to assist in framing the charter or any amendment or revision and /or; (ii) the cost to print the charter and any amendment or revision. It is not enough that the expenses be reasonable and necessary. These interpretations are consistent with the language used in Section 410.06, taken together with Chapter 645 of the Minnesota Statutes governing the canons of interpretation. "[G]eneral words are construed to be restricted in their meaning by preceding particular words... i4 In the cases discussing this canon, it has been held that: where, in a statute, words particularly designate specific things (reasonable compensation and cost of printing) and are followed by words of general import regarding comprehensively designating things (reasonable and necessary charter commission expenses), the latter are generally to be regarded as comprehending only as to the matters particularly stated. In other words, the latter used phrase (reasonable and necessary commission expenses, found in sentence two of §410.06) solely relates to the prior phrase (reasonable compensation and cost of printing, found in sentence one of §410.06). The first part of Section 410.06 particularly designates that the commission may contract for the reasonable compensation of an attorney or other personnel for the sole purpose of framing a charter and amendments. Following the limited contractual language are the words that prescribe the payment of $1,500.00 by the City using the general term of "reasonable and necessary charter commission expenses ". Under the rules of construction the phrase "commission expenses" relates solely to the payment of compensation to an attorney or others employed to assist in framing amendments or revisions to the charter (the cost of printing the amendment or revision is also included.) Recently, the Dakota County District Court, in denying a charter commission's request for reimbursement from the City for the cost of producing a Web Site, found that for expenses to be paid by the city, the expenses must relate to the statutory itemized expenses of: (1) the employment of an attorney and other personnel to assist in framing the charter and any amendment or revision and (2) the cost to print the charter and any amendments or revision. A city is not authorized by statute to pay for other charter commission expenses. The Court's interpretation also conforms to the position of the Office of the State Auditor. The Office of the Auditor has stated that to "simply annually appropriate $1,500 to a charter commission . . is inconsistent with the statute." The expenses must be reasonable and necessary and related to the charter commission's purpose and powers laid out in the statute." 'Minn Stat. § 645.08, subp. 3 (2008). 6 • • • • • • SOURCES FOR OPINION • Flyer entitled Keep Your Rights prepared and paid for by Lino Lakes Charter Commission • Invoice from Summit Printing, Inc. for Charter Commission flyer • Invoice from Mailing Solutions to Lino Lakes Charter Commission for mailing piece • Invoice from PoliGraphics to Lino Lakes Charter Commission for 50 lawn signs • Printed material from Web site: www.linocharter.org (Copyright 2008. Lino Lakes Charter Commission. All rights reserved.) • Opinion of the Attorney General 159a -3 (May 24, 1966) • Opinion of the Attorney General 159b -11 (September 17, 1957) • Findings of Fact, Conclusions of Law, Order and Order for Judgment and Judgment in Bette Fedde, on behalf of the Eagan Charter Commission v. City of Eagan, Dakota County District Court (May 5, 2008) • Statement of Position by Rebecca Otto, Office of the State Auditor, Expenditure of Public Funds on Ballet Issue Advocacy (2008) • Minn. Stat. Chapter 410 • Minn. Stat. §211.B.01 and 211B.09 • Minn. Stat. §210.06 • Minn. Stat. Chapter 645 SSeverson, Sheldon, Dougherty Et Motenda, P.A. 111 EVERSON SHELDON Attorneys I Advisors MEMORANDUM TO: Dan Tesch, Director of A6ministration FROM: Michael G. Dougherty DATE: April 10.2009 : Summary of Attorney Opinion In accordance with your request, the following summarizes the key components of our written opinion dated Apni. 6, 2009, regarding the investigation of Charter Commission Materials. s The Charter Commission has limited powers which are enurneraled in Chapter 410 of the Minnesota Statutes. • The Charter COMIlliSSi012 may •only contract for: (1) the employment of an attorney and other personnel to assist in framing- a charter and any amendment or revision and (2) the cost of minting the chatter and any amendment or revision. • The Charter Commission does not have any express or implied powers to prepare or contract for the preparation of flyers, lawn signs and/or Web sites. • The Charter Commission has no express or implied power to manage and control public property, public employees or city business,. • Minnesota Statutes limit the City of Lino Lakes' payment of Charter Commissiori expenses (cost of attorney and other personnel assisting in the amendment or revision of the charter and cost or printing) to $1,500.00 per year, • The City of Lino Lakes may exceed the $1,500.00 per year limit if the Cotmcil deems the excess payment (cost of attorney and other personnel assisting the amendment or revision of the charter and cost of printing) to be necessary. When directed by the Charter Commission for payment, the payment made by the City of Lino Lakes shall be paid directly to .the vendor (attorney or printer). cc: Al Rolek. Finance Director • • • • • • WS — Itemll WORK SESSION STAFF REPORT Work Session Item 11 Date: 7 June 2010 To: City Council From: Daniel Tesch, Director of Administration/ Interim C.A. Re: Organizational Study Background Staff continues to collect the names of organizations that could be of assistance on this project. Requested Council Direction Attachment(s) 1. 1 • • WS — Item tv WORK SESSION STAFF REPORT Work Session Item It— Date: June 7, 2010 To: City Council From: Julie Bartell Re: July Work Session Schedule Background Due to the July 4th holiday, city hall will be closed on July 5. Therefore no first Monday of the month council work session was set when the 2010 council schedule was established. Requested Council Direction If the council wishes to schedule a work session for July, staff requests that the date be determined so that proper notice and staff preparations can occur. Attachment(s) 2010 City Council Meeting Calendar 1 r Sa ! Su 3 1 1 10 17 I 15 3 24 ' 22 31 1 29 Lino Lakes City Council - 2010 Meeting Calendar = City Council Meeting, 6:30 p.m. (2 "d & 4th Monday), Council Chambers = Council Work Session, 5:30 p.m. (1st Monday), Community Room = Work Session, 5:30 p.m.; Council Meeting, 6:30 p.m. (4th Monday), Council Chambers = Packets for Work Session and/or Council Meeting are distributed January u Mo T We 3 10 17 24 31 Th Fr Sa 9 2 7 8 9 12 13 14 21 26 . 28 15 16I 2 22 23 29:30; April Mo Th 1 7 8 3 14 25 Fr Sa E 2 31 10 16 17 23 24 30 July February Su Mo € Tu We 2 3 8 19 20 26 27 28 May Mo Tu We 5 Th Sa 1 6 7 1 8 13 14 15 20 21 22 Fr 28 29 August October u Mo Tu We Th FrIS 1 8._..:9. 2 15I 16 22;231 29'30; Fr Sa 6 7 13 14 20 27 21 28 30 31 November Su Mo I Tu I We Th Fr 2 L 3 (4 5 9 110 ; 12 .13 16 = '18 19 20 Sa 23 24 ;25 {26;27; 130 March • u Mo Tu We'ThFrISa 2 3 4 5 1 6 10 11 12;13= 21 28 2 23 30 18 19'20; 25 26 27 June September December Mo Tu \A/_ Th t Fr Sa 2 3 4 8 9 10:11 15 X16[17118 24125; 26 � N 28e ,. j30 3