Vergas HRA pleased at development’s progress

By Robert Williams

Editor

One thing can be said about the monthly meeting agendas of the Vergas Economic Development Authority (EDA) / Housing Redevelopment Authority (HRA) and that is more chatter about the Sunny Oaks development lots for sale.

It’s been going on for years, but in the past month something has drastically changed for the better. It started with the sale of the first lot, something the HRA has literally been waiting years to happen.

“We all kind of knew that we needed that first one,” said HRA member and RE/MAX realtor Joy Summers.

The tax forfeiture lots came with income restrictions, assessments for city utilities and were on sale in a less than favorable market. According to Summers, it took a positive change of outlook on the lots and finding the ideal buyers to get momentum moving on the properties.

It is not like lots stay on the market in Vergas. The restrictions and oddities associated with Sunny Oaks kept them from selling as fast as Josh Hanson’s Lawrence Lake Acres development, which are down to 1-2 lots remaining of the 24 in total. On the other side of town, the Keith and Shelley Bunkowske’s Keilley Shores lots have all sold, according to Summers.

While the Sunny Oaks lots were somewhat unusual with their quirks, it was a lot of work by HRA members to spread the word to find buyers who were capable of providing a workaround to affordability.

It started with an income restriction that was a strict window between making at least $100,000 as a couple or family to qualify for bank financing, but the lots also had an income maximum between $107,000-$119,000.

“The income restrictions that we were working with were figuring $300-350,000 to build a house,” said Summers. 

The workaround is that while the prospective buyer pool is somewhat limited by the income restrictions, those who have recently made an investment in a lot are also the kind of people who will invest what Summers called, “sweat equity,” meaning they can shave off some of the expense of building by doing it themselves.

“They’ll still have the income restrictions; they’re still going to have to finance whatever they’re doing, but because they’re willing to put their own labor into it, it will make whatever they’re building much more affordable,” she said. “It took somebody willing to step into that role to have other people say, ‘we can do that,’ and even the one I talked to yesterday, ‘work together.’”

Several of the buyers know each other and Summers encouraged them to combine forces to make the builds more affordable for all parties.

The recent purchases bring a lot of relief to the HRA members who had to rely a lot on hope and a positive attitude to find ways to make these lots sell.

“I think that has a lot to do with it,” Summers said. “I think attitude has a lot to do with it. I credit a lot to the HRA, sitting in those meetings and talking about all those possibilities and starting to really get ideas on what can be done with it. That’s what spurred the passion to get people in there. As soon as somebody is excited, somebody else is going to catch the vision and get in there.”

It also comes out as a negligible result in terms of money for the HRA.

“The goal was to get people in there and profit is bonus if there is any,” said Summers.

Any profit will be very minimal because the HRA made concessions to get the properties sold, which stems from both the assessments on each lot for water and sewer, along with what comes from the lots being tagged affordable housing by Otter Tail County.

“We decided to roll the assessments into the purchase price,” Summers said. “So, we have to pay off the Vergas city, sewer and water assessments.

“Every single part, the HRA, the city, the buyers, I think everyone benefits from the sale of those lots. It might take 10 years for the city to start recouping some cost but having a step in the right direction the timeline of getting to that 10-year benefit has to start at some point.”

Even better when compared to the recent status quo of the lots just sitting there empty.

Another factor in causing the land grabs is the impending end of Otter Tail County’s “Big Build” program, which provides a return of $15,000 in property taxes over five years. The county would return $10k and the city the remaining $5k.

“They know that those applications have to be in by the end of November in order to be approved in the December city council meeting,” said Summers.

The Big Build was the county’s housing growth initiative to build, preserve, or rehabilitate 5,000 housing units by 2025.

Three of the eight Sunny Oaks lots are sold with an offer pending on a fourth. There are 11 total lots. Three are owned by Otter Tail County with plans to build two triplexes slated for senior living in the near future.

The County HRA held a groundbreaking in August after completing the six-rental unit construction of two senior triplexes in Dalton. New York Mills and Ottertail are scheduled for similar projects pending grant application approvals. The county applied last summer for Housing Infrastructure bonds for two sets of triplexes in each of the aforementioned communities.

The end of the Big Build could very well push the final four lots off the market. It provides a significant tax incentive to go with lots that are already incentivized to sell.

“Quite possibly,” said Summers. “I get other phone calls and people are seeing the potential here. They are at a reduced rate, below value, there’s city, sewer and water there. There are so many things there that make these such a good investment. If you can figure out how to help someone afford the lot under the income restrictions and they can get something built on it there is so much potential for these.”

Summers is taking on two different roles, one as realtor and the other as a member of the HRA. She had to recuse herself from some HRA discussions and all voting on these particular lots. Summers sought legal consultation to make sure a conflict of interest was avoided. It is an issue that is not uncommon in Vergas when it comes to being a business owner and a member of the village’s governing committees.

“I had them take it to the city attorney to make sure,” Summers said. “Most people and most business owners in Vergas know that is very common in a small town,” Summers said.

Sunny Oaks is located at the intersection of West Hill Street and Dianne Avenue.