HRA Meeting Date: April 3, 2024
To: Members of the Housing and Redevelopment Authority
From: Melissa Hanson, Housing Coordinator
Title
City of Northfield Housing and Redevelopment Authority to Consider the Sale of Property at 2334 Elianna Drive, Northfield.
Body
Action Requested:
The Housing and Redevelopment Authority (HRA) to approve Resolution 2025-003 to sell property at 2334 Elianna Drive, Northfield to the existing tenants and approve the attached purchase agreement.
Summary Report:
The HRA’s mission is to be a partner in providing a sufficient supply of affordable, adequate, safe and sanitary dwellings in Northfield. Our goal is to create a community with housing opportunities available along the entire housing spectrum: from renters to homeownership, first-time homeowners to senior living, workforce housing, and empty nesters.
On May 2, 2024, the Board adopted Housing and Redevelopment Authority Policy 10.03- Land Disposition Policy via HRA M2024-014. In that policy, Procedure A identifies that existing HRA-owned rental units are to be sold to the existing tenants whenever possible and follow state statute.
The following sales took place prior to the adoption of Policy 10.03 and are aligned with that policy. At the October 28, 2022, HRA Board meeting, the Board elected to offer rentals to the existing tenants. The HRA sold 517 Washington - used by the Community Action Center (CAC) for their emergency shelter program - to the CAC November 2022 for $222,700. Similarly, 2007 Hidden Valley had initially been rented to a non-profit housing organization. Subsequently, the HRA entered into a lease agreement with the family renting that home and when the family moved out Fall 2023, it was sold to Rice County Habitat for Humanity in May 2024 for $114,762. The property was then rehabbed by Rice County Habitat for Humanity and sold to an income eligible applicant family with income under 80% Area Median Income.
The following discusses the HRA powers and land sale process.
General HRA power to dispose of real property.
The HRA has the general authority to sell property that it owns because it is a body politic and corporate. If the land or property to be sold is in a redevelopment plan or project area, then there are other applicable requirements, The properties that the HRA is considering selling are not in a redevelopment plan or project. The process for sale by the HRA is governed by statute.
Minn. Stat. section 469.012, Subd, 1 e. Property, contracts, other instruments
An authority may, subject to the provisions of section 469.026, give, sell, transfer, convey, or otherwise dispose of real or personal property or any interest therein and execute leases, deeds, conveyances, negotiable instruments, purchase agreements, and other contracts or instruments.
Subd. 1 w. Have, fix, get rid of property.
An authority may:
(1) Own, hold, and improve real property, and
(2) Sell, lease, exchange, transfer, assign, pledge, or dispose of any real or personal property or any interest therein.
Price negotiation and timing.
Price should be market value for the sale if to a private property buyer. The HRA may want an appraisal to determine market value, but an appraisal is not required. The HRA should determine what price it wants to offer the property for sale. Typically, any staff negotiation of price should occur after the HRA determines value of the property. This might be the subject of a subsequent closed meeting of the HRA as well to consider any appraisal or determine the asking price.
While the HRA does not have a policy stipulating how price is determined, as practice, the HRA has historically started the negotiation process for properties starting at their Estimated Market Value (EMV) as determined by the Rice County Assessor’s Office.
Minn. Stat. section 469.032 Use Value.
Subd. 1. Determination.
Prior to lease or sale of land in a project area, the authority shall, as an aid in determining the rentals and other terms upon which it will lease or the price at which it will sell the area or parts of it, plan an estimated fair market or rental value upon each piece or tract of land within an area which, in accordance with the plan, is to be used for private uses or for low-rent housing. The value shall be based on the planned use. For the purpose of this valuation, the authority may cause a fair market appraisal to be made by two or more land value experts employed by it for the purpose or it may use the land appraisal services of the municipality. Nothing in this section shall be construed as requiring the authority to base its rental or selling prices upon the appraisal. The authority may redetermine its estimated values both prior to and after receipt by it of any proposal or proposal to purchase or lease property.
Subd. 2.Use Value.
The aggregate use value placed for purposes of lease or sale upon all land within a project area leased or sold by an authority pursuant to section 469.001 to 469.047 shall exclude the cost of old buildings destroyed and the demolition and clearance thereof.
Closed sessions
The HRA may schedule closed meetings to discuss the offer parameters and purchase price.
Minn. Stat. section 13D.05, subd. 3 (c), A public body may close a meeting:
(1) To determine the asking price for real or personal property to be sold by the government entity;
(2) To review confidential or protected nonpublic appraisal data under section 13.44 subd. 3;
(3) To develop or consider offers or counter offers for the purchase or sale of real or personal property. An agreement reached that is based on an offer considered at a closed meeting is contingent on approval of the public body at an open meeting. The actual purchase or sale must be approved at an open meeting after the notice period required by statute or the governing body’s internal procedures, and the purchase price or sale price is public data.
Historically, the HRA has acquired and sold property based on Estimated Market Value (EMV) as provided by Rice County Public Tax Records. In 2025, the EMV for 2334 Elianna Drive is $261,300. In 2023, when the HRA began discussing the sale of this property to the existing renter, the EMV was $233,700.
The attached purchase agreement contemplates:
1. Sale price of $223,700 - as originally agreed to in 2023.
2. Deed restriction requiring owner-occupancy for 3 years.
3. Property sold “as-is.”
Other items considered in an “as-is” sale price in negotiating with the tenants:
a. No 3rd party real estate commissions = $13,065
b. No allowance for carpet/flooring replacement = $10,000
c. No allowance to repair/replace kitchen and bathroom cabinets = $1,500
d. No allowance for appliance replacement = $4,000
e. No HRA-funded down payment assistance = $25,000
The reduction in estimated value for the as-is sale is $53,565.
Staff recommends approval of HRA Resolution 2025-003 and corresponding purchase agreement to sell 2334 Elianna Drive to the existing tenants and for the proceeds to be deposited into the Local Housing Trust Fund for future housing initiatives.
Alternative Options:
The HRA could choose to renegotiate terms. Staff would recommend a Special Closed Meeting to be scheduled to discuss a counteroffer.
Financial Impacts:
As of January 16, 2025, the HRA reserve balance is estimated at $489,750 with unrestricted reserves as $239,973. The Local Housing Trust Fund is currently estimated at $181,612.
Tentative Timeline:
April 3, 2025 HRA Board to consider sale of Real Property
April-May 2025 Finalize financing
June 30, 2025 Close