City Council Meeting Date: February 17, 2026
To: Mayor and City Council
From: Ben Martig, City Administrator
Scott Wopata, Community Development Director
Brenda Angelstad, Finance Director
Title
Consider Resolution Dedicating Source of Public Revenue for the Local Housing Trust Fund.
Body
Action Requested:
The Northfield City Council approves Resolution Dedicating Source of Public Revenue for the Local Housing Trust Fund.
Summary Report:
City staff provides the following summary and recommendation regarding Statewide Affordable Housing Aid (SAHA) and the 2025 Local Housing Trust Fund (LHTF) Grant Program. The Statewide Affordable Housing Aid to Cities program was established by the Minnesota Legislature in 2023 as an ongoing state aid program to support local affordable housing preservation and production. Funds may be used for a broad range of eligible housing activities, including gap financing for new construction, rehabilitation, rental assistance, homeownership assistance, infrastructure necessary to support affordable housing, and other locally determined housing strategies consistent with statutory income limits.
Separately, the City applied for funding under the 2025 Local Housing Trust Fund Grant Program, which is a competitive state program intended to match locally committed housing trust fund dollars on a dollar-for-dollar basis. Eligible uses are generally limited to activities serving households at or below specified income thresholds and must comply with additional program requirements established in the grant agreement. Northfield has been preliminarily awarded $150,000 under this program; however, the award remains contingent upon execution of a final grant agreement with the State.
Staff recommends that future Statewide Affordable Housing Aid allocations be deposited into the HRA General Fund (Fund 295) rather than the HRA Local Housing Trust Fund (Fund 296). While both funds support affordable housing activities, the Housing Trust Fund is subject to narrower statutory and programmatic restrictions tied specifically to trust fund purposes and, when applicable, grant match requirements. Depositing SAHA funds into the general HRA fund preserves maximum local flexibility in structuring projects, layering financing, responding to emerging housing needs, and aligning expenditures with evolving Council priorities, while still complying fully with SAHA statutory requirements. By contrast, placing SAHA funds into the Housing Trust Fund would subject them to additional local policy and structural constraints beyond what state law requires for SAHA.
Similarly, staff is not recommending depositing Community Development Block Grant (CDBG) program income into the Housing Trust Fund. While CDBG funds are already in their own fund and carry federal eligibility and income-targeting requirements, transferring those dollars into the Housing Trust Fund would impose additional local restrictions that are not required under federal CDBG regulations and could limit future flexibility in project design and compliance management.
Upon receipt and execution of the 2025 Local Housing Trust Fund Grant agreement, staff will return to the Council with a one-time budget amendment for formal action. The recommended structure will include matching the $150,000 state award with a transfer from HRA Fund 295 (General HRA Fund) into HRA Fund 296 (Housing Trust Fund), consistent with grant requirements and prior Council direction regarding local match commitments.
This revised recommendation that differs from the recommendation from staff and HRA from an amended 2025 action (attached). The revised recommendation reflects additional research and implementation planning completed since the HRA’s prior action, led collaboratively by the City Administrator, Finance Director, and the new Community Development Director. As staff worked through anticipated near-term uses, compliance considerations, and fund-accounting implications, it became clearer that depositing SAHA (and CDBG program income) into the Local Housing Trust Fund would unintentionally add layers of restriction and administrative complexity beyond what those revenue sources already require. In particular, SAHA is designed to be a flexible state aid tool that can be deployed across multiple locally determined housing strategies (within SAHA eligibility), and keeping SAHA in the general HRA fund better preserves that flexibility while still maintaining full statutory compliance and transparent reporting. Similarly, CDBG dollars are already governed by detailed federal eligibility rules, and routing those funds into the Housing Trust Fund would further narrow allowable uses and complicate compliance tracking without providing a corresponding program benefit. Staff alignment on this revision is grounded in a shared conclusion that the general HRA fund provides the most practical and least restrictive structure for ongoing SAHA funds and CDBG administration remains in its own fund, while the Local Housing Trust Fund remains the appropriate, purpose-built vehicle for the one-time LHTF Grant award and required local match transfer once the State grant agreement is finalized.
City Plans & Policies Relevance:
Not applicable.
Alternative Options:
None recommended.
Financial Impacts:
No change in financial impact.
The following is the City’s State Certified SAHA Funds per State website:
2026 $31,972
2025 $31,885
2024 $75,056
2023 $75,056
Tentative Timelines:
If adopted, the resolution would go into effect immediately.