No one's working.

But we don't have that one.

And then we have one and then do it.

I think we're going to go.

And then you're not going to be able to do that.

Okay.

All right.

Calling the before the St.

Paul Howard and Redevelopment Authority's order.

Roll call, please.

Here, can you?

Here.

Yeah?

Here.

Chair Johnson?

Here.

There are four present and three absent.

Commissioners Bowie and Coleman are excused.

Item number one for discussion is resolution twenty-six-one zero zero eight.

Reservation of funds for certain St.

Paul projects applying for funding for the Minnesota Housing Finance Agency.

All right.

So we had a presentation both on the as well as informational staff reports that were presented at the last meeting.

Just wanted to say thank you guys for all the work that has continued.

I think we're following some of these projects over the course of many years.

I see several folks and some of the developers of these projects as well.

So that can create our consistency and going back to MHFA for additional funding.

I am hopeful that we will continue to see the investment in the city of St.

Paul, especially surrounding some of our form of housing projects and redevelopment projects here.

It's very important to see the state investments.

The microphone catches up.

Wonderful.

But yes, just very, very important when we have, you know, we've seen some of these projects come before us last year, before that.

So seeing them and ensuring that their investments is persistent with our dollars being met.

So I'm very supportive of this reservation of funds and also supportive of the projects that'll be seeking funding for it, including those, but not limited to those that are on the east side, but throughout the city.

So I'll take a motion from uh Commissioner Naker to approve.

Any further questions?

All right.

Seeing none, all those in favor?

Aye.

All opposed.

Four in favor, zero opposed.

The resolution has adopted.

Item number two for discussion is resolution RES 26-1026.

Authorization to release the 4D affordable housing and send it to program.

Covenant on 556, Gotzian Street, St.

Paul, District 4, Ward 7.

Thank you, Kelly.

I appreciate that.

And also just uh a correct quick correction.

This is uh staff report, but also we'll take an action today because of the time sensitivity of it.

Um, but I do want to head it over to Dr.

McMahon if there's anything you want to say in preface of uh the program and folks kind of just will see why in the presentation.

Yeah, thank you, Chair Commissioners.

Um happy to introduce Lucas Allen and looking forward to his information and presentation on this.

Thank you also for noting it's an action item before us today.

It's a rental property that will be sold to become owner-occupied, um, income restricted owner-occupied, but so they're requesting the covenant be released since the um it will no longer be a rental property.

But Mr.

Allen has more information, so thank you.

Thank you, Chair Commissioners.

Um, is the item as mentioned.

So a little bit of an introduction about the 4D program.

It is a program enabled by state law that calls for a property class tax reduction to help preserve affordable housing.

And so once a unit becomes enrolled in the local 4D program, we take that to the state, which then takes that uh determination to the county for uh property assessments in the following years.

In most cases, this amounts to an up to 80% reduction in a property tax for a fully enrolled 4D property, um, but it is rated prorated to a certain portion of units uh depending on how many are enrolled per site.

So considering that applications are currently not open for the city's local 4D program.

Uh we're currently in a more of a compliance process.

And so how that looks is we send out compliance forms to landlords or property managers, they fill those out, and then uh after they do that, they return it to us, and then we look primarily for compliance with three things the maximum rent limits, a 3% annual increase limit, and use how new household income limits.

Uh once they are verified as compliant for all of the properties throughout that year, uh we send that list to the state, and then the state does that sort of process I mentioned.

Um program participants only receive the benefit in proportion to their units, and then the state also has a sort of compliance process they run concurrently to ours, and then they cross-reference those lists and then send their final determinations to the county.

Any sort of changes that happen to enrollment um are largely on a compliant, non-compliant basis.

We rarely uh remove individual properties um from the program just simply because they can go into non-compliance and there aren't necessarily any uh detriments to that minus the losing of the 4D status um uh the intention of the program.

Um so for this particular instance, 556 Gotsian Street is a single unit restricted at 50% AMI and was enrolled into the city's 4D program in 2023.

Uh the home is currently within the purchasing process with an income qualifying uh owner-occupier who was actually using DPA funds um to help with the the purchase of the home.

And so the request is to release the restrictive covenant in a 556 Gotsians that the sale may commence.

Um, this is essentially because there will be no more units left over.

Um, that would be rentals um after the sale is sold, and so the 4D restrictions sort of become moot at that point.

Um, and so this is helping them clear a clear title.

Any questions?

I don't see any right.

Well, actually, Commissioner Naker, just when you thought, sure.

So I just want to make sure I understand.

Um properties can choose to not comply with the program and then they then they lose the benefit.

And then you said we usually don't allow them to unenroll because the new property owner could just choose not to comply.

In this case, we're removing the declaration because it's we need to in order for it to sell.

Can you just say a little bit more about why?

Yeah, sure, Commissioner.

Um, so the reason in this instance is because it will be um owner-occupied rather than a rental unit, and the 4D um uh uh tax statute is only qualifying for rental units, and so by having this um having a 4D statute tied to a property that is owner-occupied, sort of complicates the the process a little bit.

And it also creates an unnecessary burden in the case of future sales to a future owner-occupier because the declaration still calls for certain uh administrative processes whenever there is a sale, as well as like compliance informing and things like that.

Um so once um the the 4D program guidelines to call for when there is a sale to an income qualifying owner-occupier.

The it wasn't mentioned in the presentation, but the income qualification is 80% AMI.

Um, once they meet that test, then uh the properties can be sold for those individuals, and then the declarations um can be removed.

Okay, so again, just just so I think this is important to in this case.

Did we know about the sale?

I'm sorry.

Did you know about the sale ahead of time?

Correct.

Yeah, we have a um a link that they can fill out um that informs us, and then we go through this process uh to bring it forward to the board.

What is the timeline for the closing?

The closing in this instance was uh previously scheduled and it had to be moved in order to accommodate this meeting.

Um, hence some of the uh uh time sensitiveness that was communicated.

Prior to the sale, though, where was that communication in place?

So, like just from the timeliness of it all, I'm not I'm not aware that the city was that the HRA body knew in advance of the cell that this was going to take place further than being notified on the back end that it was going to happen.

Is that accurate, Mr.

Allen?

Yeah, so we were in um chair, we were in communication with uh the various agents involved in the process.

Um, and then we're sort of uh this was the first sale that in my tenure in this position that I had to bring forward to the board, and so it was sort of a learning process as to um how exactly the process would would pan out.

Director Big Man, could you speak a little bit to the process itself?

The time sensitive nature, like the what happened in the back end because I think one of the things that is a little confusing for me is how we didn't it doesn't seem like there was like maybe the time frame of which you might have the discussions and time to kind of explain what the the trade-off of this property I don't know if to what extent that took place um just because we kind of we see it at the end, it's like okay.

Here's a cell that's gonna happen that's gonna be owner-occupied, we have to remove the the 4D requirement.

But there were clearly was multiple steps leading up to that, it's just hard to see.

Yeah, chair, commissioners.

Um, part of the time sensitivity of this one is that you know, typically prefer to have a little more leeway on this one.

We were notified of the sale of the property after closing had been scheduled, and so that closing date had been was then pushed back in order to have an HRA meeting to have this action before it.

But that's the reason for the consolidation of report and action in one meeting instead of instead of two, as well as with a July 4th holiday, there being the first week off from HRA next week.

Uh Commissioner Kim.

Um, question about the timing of this, but more specific to even potentially other scenarios we might find ourselves in.

Is the reason because the title company pulled title and found the declarations?

Like, is there a is there a different process in which the city would be notified of that sale prior to a title company pulling title and seeing declarations on the property?

Chair Commissioners, and I'm actually gonna rely on the experts in the room to help me out in this one as well.

Um, but you know, typically I mean the owner's aware, and so the owner is being part of in the 4D program, receiving the tax benefit.

Should the expectation is should have the knowledge that that covenant is on there if they choose to sell to an owner-occupied and you know, individual.

And so typically they'd have that awareness to then know that covenant should be released to move forward.

I don't know anything you want to add.

No, uh chair commissioners, that's essentially how the process works is they inform us, hey, we're selling this property, um, and then we work on developing the documents and things, and then in specific instances where it's a declaration removal, we bring it before the board.

Okay, so it's it's fairly typical then for the owners to know that it is something that they've signed and that they need to notify the city generally speaking.

Yeah, chair commissioners.

I think part of it is because as being in the program, there is that annual compliance.

So there's that annual sort of touch point with staff already and that that communication that exists there.

So that awareness of the program generally, I think a lot of it comes from the compliance and the reporting.

Okay, that sounds great.

I appreciate it.

My my line of question is much more around like how do we have this from happening in the future?

But it sounds like this is um maybe um not unique, but just not one that diverted from a normal process.

Correct.

Possibly, right?

Like, I I'm kind of listening to that saying, Mr.

Allen, my guess my follow-up question for you is how often are you connecting with those and the 4D program and like what does the cadence in the process look like from the end piece of just, you know, typically when do you actually hear about a sill?

And also, then what to what cadence are we kind of operating in a place to ensure that we don't just have a tax credit that's put in place that someone can just decide like tomorrow they're gonna sell the property and have to tell us, and then now we have several different uh several ones of these coming forward in the future.

Like what is the what are the safeguards for us and what is the process looking on the back end right now?

Yeah, I'll just add chair and commissioners that there aren't many sales.

I mean, there it's not a every week things happening, there aren't tons of them.

Often if there's a if the property is a rental property and it's being sold, often it's being sold with the intent for it to remain as a rental property, in which case no HRA board action is needed.

It's you know, in the circumstance here that is the the use is going from a rental to an owner occupied place that has the impact.

Yeah, Commissioner Aker.

Thanks, Chair.

I appreciate the exploration of this because I do think it helps us understand the program better.

I mean, the way it sounds to me is that the annual compliance check is the way we make sure that a program still qualifies to be in 4D, and that 4D is a benefit to the property owner because it's a tax reduction.

So I guess I'm not as worried about properties kind of falling through the cracks of this in some in the way that I sometimes am, because if they fall through the cracks, that just means they don't get the benefit of the property tax reduction.

So I I think this is a really interesting conversation, but as I'm thinking about it, it doesn't seem to carry the same risks.

Worst comes to worst.

You know, we're not, they don't continue to get the benefit, and then we can assume they'll let us know if they want to receive it again.

Yeah, I think it's more so like what's stopping an order from receiving the benefit, right?

And doing the sale, and then so they receive the benefit of being a 4D property, and then they sale within the same year in the same time frame, so they wouldn't have qualified else otherwise, but they qualify because they're a rental property, but now they're gonna sell to be an owner property with like kind of like you know, lack of timing, lack of that communication that that was their possibly their intent mid year.

Well, does that to that yeah?

Yeah, I guess that's like some of that's kind of where I'm coming from when it comes to just like the annual review process itself, and then there's the annual reviews that possibly happened on this property, and then there's the reality of that mid-year uh they're possibly benefiting from the pro from being a 4D property with the tax decrease and now selling to be an ownership opting out of the program with very little notice that that is kind of what I'm sharing with, is less of them falling through the cracks, but more of just like I hope that folks do have a clear understanding when they're in the program.

Just that the expectation would be that they kind of share with staff here about their not necessarily they can't sell, but it's like the intent of sale, I think could be communicated in a way that does not have us brushing on the back end to do something retroactively.

Um but yeah, Commissioner Naker.

No, thanks, Chair.

That's that helps me understand the question.

And I wonder, then my question to staff would maybe be is there sort of any proration or back taxes paid?

So I got the benefit of a lower tax rate because I have a 4D property a month later, I saw.

I understand this doesn't happen very often, but just trying to understand.

And now it's no longer an affordable property, it's owned by the new the new owner.

Um, I know taxes are you know paid annually, so is that is there a whole year worth of 80% reduction then, or is there some way of kind of clawing back or kind of be realizing the benefit of the fact that now it's actually it shouldn't be in 4D anymore for the rest of the year?

And maybe the same same question could be asked if there's an annual compliance check for 4D.

If at some point during the year the property stops being affordable for whatever reason, it wouldn't have to be a sale.

How do we know that?

And is there a way to realize the tax differential?

Yeah, Chair Commissioners will say some of this more in the weeds details.

I think we can follow up and provide as more information.

Um, just noting that our role in it as a city is the compliment, you know, is the once a year getting the compliance and sending that list to the state, it's a state tax benefit, a state program, and so I think maybe we'll want to connect with some of the state partners on some of the finer details of how they apply that tax benefit and some of those questions, unless there's anything you want to add to it uh chair commissioners, in terms of the the former question that was asked regarding the continuation of the benefits.

So it is for um, like if a if a site is compliant this year 2026, that is reflective of property taxes 2027, and so in that case, then um I would imagine that the county has some sort of process where in which their assessors are aware of a sale transitions this unit because they will be able to recognize that it is no longer a rental property ergo, ineligible for the 4D classification because 4D is only eligible for for rental units.

It would be good to understand that that better though, especially now that it's an 80% tax reduction, not 40%, that's a significant reduction.

Chair commissioners will follow up with some of the the details of implementation essentially, if you will, the tax benefit.

Yeah.

I um appreciate that and I appreciate the dialogue.

I think that's I also was, you know, like okay, let's go to the head around that, but I I think as it pertains to the actual item itself, it is in front of us to um to take that uh step today just to authorize the release.

Um I just want to make sure that folks don't have any other questions before we move it to a vote.

Okay, seeing none, I will take a um I will take a motion from Commissioner Naker to approve all those in favor.

I all opposed six in favor, zero opposed.

The resolution is adopted.

Item number three is a public hearing, resolution public hearing 26-145.

Resolution approving and authorizing the sale and conveyance of an HRAO and hearsal located at 1087 Ross Avenue.

Authorization to enter into development agreement and authorization of expenditures for redevelopment district four, ward six.

Alrighty, this is a public hearing on this item for item number three.

If you're here today to bring uh to share any public comments on it, now would be your time.

Seeing everyone rushing to the podium.

No, kidding.

Seeing no one, I uh will take a motion from Commissioner Yang to close the public hearing and approve.

Any questions?

Seeing none, all those in favor?

Aye.

I all opposed.

Six in favor, zero opposed.

The public hearing is closed.

A resolution is adopted.

As a reminder, we don't have a meeting next week.

Our next meeting is July 8th.

Um, and then we will not have a meeting on the 15th, so then following that, our uh meeting after that will be on the 22nd.

Um, so there may be a couple items that come before you with introductions that have to act on the 22nd for the eighth meeting.

And if there's anything that will come up there, you may see that within those two dates for July, we may do a couple introductions and actions if needed, just because we don't want to go the whole month without being able to do business.

But otherwise we are adjourned.