HRA to manage Two Harbors apartment building
The Lake County Board of Commissioners and the Lake County Housing and Redevelopment Authority are working together to allow the HRA to take over management of a tax-forfeited apartment building this summer.
HRA chair Tom Lovdahl and vice chair Bob Entzion discussed the options regarding Lakeview Apartments in Two Harbors with the board during the board's meeting May 9 and the following day the HRA board voted to enter into a one year lease with the county to manage the property with the potential to buy the property after the first year.
The HRA plans to take over management of the building July 1 and the board will vote Tuesday to approve the plan and the county administrator and county attorney will both work to put together a lease agreement.
The apartment building is currently being managed by the former owner, Karl Henze, who is still collecting rent from residents and maintaining the building. The Lake County attorney and land commissioner approached the HRA about managing or buying the property. The HRA worked with the Arrowhead Economic Opportunity Agency to assess the building's needs and the feasibility of managing or owning the property.
"One of the advantages that we have over individuals is we have the potential with AEOA to get significant dollars to put into a program like this which an individual would have a hard time doing," Entzion said. "The whole thing when we looked at it surprised us. Some of the things that have been done in there, they did a good job, but it does need significant money put into it."
Entzion said after the walk through with AEOA, the HRA would want to expand the number of apartments from seven units to 12 or 13. During the year lease, the HRA would continue to assess the needs of the building and analyze the construction costs versus the potential income of the property. They would also spend the year securing grants from AEOA and other entities to help with the improvements and increasing the number of apartments. AEOA estimated the building needs at least $500,000 in renovations and repairs and the HRA would provide a matching investment of up to $150,000.
The building sits on four parcels of land in Two Harbors, of which one is a homestead parcel. Three of the parcels went into forfeiture in 2012 and the fourth homesteaded parcel was forfeited in 2015. The county has three options for the property: it can sell the property at auction like other tax-forfeited properties; it can sell the building to the HRA or other government entity for less than market value; or, since there is a homestead parcel, the county can sell the building back to Henze for the the back taxes and penalties owed to the county. Bypassing the auction to sell the property to another individual or private entity would require special legislation by the state legislature.
Entzion said the HRA would hire DW Jones Management Inc. to maintain the property, similar to what it does with Silverpoint Apartments in Silver Bay. Unlike Silverpoint, however, if the HRA bought Lakeview Apartments, the HRA would also be paying taxes on the property and money would again start coming into the county on the property.
Henze was also at the County Board meeting and the HRA board meeting and indicated he wished to work out a plan to purchase the building back because it has been in his family for more than 100 years.
The County Board and HRA both were reluctant to allow the property to be sold at auction because at auction there would be no control over who bought the building and both entities want to maintain the property as a source of quality affordable, low-income housing in a community that is critically short of that type of housing.
"I think that's what we'd be looking at, what do we think would be the highest percentage of success here," Commissioner Rick Goutermont said. "Right now, I think we would turn the property over to HRA and let them have at it and come up with a plan and the owner can do the same and somewhere down the road we'll entertain who has come up with the best project and get the best bang for our buck in the community."