NEW ULM - A housing Down Payment Assistance Program (DPA) will no longer be funded in New Ulm, according to information presented to the Economic Development Authority on Tuesday.
Changes by the Minnesota Department of Employment and Economic Development (DEED) resulted in the termination of the program.
The DPA policy allowed income-qualified buyers to receive up to $7,500 in down payment assistance to purchase a spec house or building lot in the Milford Heights Housing Project provided they did not sell the property for 10 years. If the property were sold before the 10 years had passed, the DPA would need to be repaid to the EDA in full.
In order to continue the program the EDA would need find a new funding source. Further complicating the situation, the EDA had one purchase agreement pending that was approved for $7,500 DPA prior to this change. With the DPA program terminated, the down payment will need to be covered by the EDA.
Board member Jeremy Berg made the motion to honor the current pending agreement and revisit alternative funding sources at a future date. The motion passed unanimously.
EDA approved holding a public hearing on a financing program and the issuance of housing facility revenue bonds for HADC Ridgeway.
City Manager Brian Gramentz explained that any bond over $10 million per year results in the requirement that the city must have "bank qualified" buyers of debt. This limits the pool of buyers and typically results in a higher interest rate for the bond sold.
Gramentz said this was not a new arrangement, and had previously been done by HADC Ridgeway in 2006.
The public hearing was set for June 10 at 7:30 a.m.
Reserve Fund Empty
After May payments to landlords were distributed, the EDA's Housing Fund reserve balance went into the negative.
Housing Coordinator Heather Bregel explained this was deliberately done by Housing and Urban Development (HUD) to eliminate the EDA's reserve balance.
HUD payments over the last few months have been less than the requested amount forcing the EDA to spend reserve funds. HUD will increase payments in June to cover this negative balance.
"It's a complicated program and we need to keep on top of the numbers monthly," said Bregel.