BY COUNCILOR STAUBER:
RESOLVED, that the proper city officials are hereby authorized to enter into an amendment substantially in the form of that on file in the office of the city clerk as Public Document No. ____________, to the Lake Superior View Condominiums project HIF loan agreement with Neighborhood Housing Services of Duluth (NHS).
STATEMENT OF PURPOSE: In 2006, the city council approved a HIF loan agreement in the amount of $120,000 with NHS for the Lake Superior View Condominiums. The project consists of the rehabilitation of an existing four-plex building on Fourth Street and the construction of a new eight-unit building on the corner of Fourth Street and Lake Avenue (the property). All of the units will be sold to homebuyers as condominiums.
The HIF program allows but does not require the city to take a security interest. Here, the loan agreement requires NHS to execute a mortgage lien on the property in favor of the city in the full amount of the loan. Bank underwriters have advised NHS that the units will not support the additional debt created by this mortgage lien, and the lien would create a barrier to obtaining mortgages on the condo units. NHS has instead requested that a mortgage lien be given to the city on its office building located at 224 East Fourth Street. The value of that property is $122,000. The city’s lien would be second to a mortgage lien in the amount of $43,769 in favor of M&I Bank.
Additionally, the agreement provides that the city may terminate the agreement in the event the property is abandoned or the use is changed. After the condos are sold to home buyers, NHS no longer has control over the property. Therefore, NHS has asked that the language which allows for such termination be deleted.
This resolution approves an amendment to the loan agreement which accomplishes the above.