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business owners or home owners would have to take out a loan to cover the cost <br />of a substantial building improvement. Assuming they had a fixed level of <br />income to work with, they would have to keep the loan payment at a level very <br />near the original 2.5 percent they should have been budgeting each year. In <br />addition, they still would have to budget for the original 2.5 percent on top of the <br />loan. In most cases, the mortgage terms would have to extend out to a point <br />beyond the life expectancy of the building they were trying to improve, as most <br />buildings built in the past fifty years are not designed to last beyond 40 years. <br />d. Based on the calculations described above, we have defined substantial <br />renovation for purposes of Minnesota Statutes, Section 469.174, Subdivision <br />10(a)(1), as renovation with costs exceeding 20% of the building's replacement <br />value. <br />e. Our goal in applying this 20% test is to provide a consistent threshold of <br />renovation costs that must be met before we will even consider whether the <br />building is structurally substandard within the meaning of the statute. If <br />a building does not have building deficiencies that require renovation with costs <br />exceeding 20% of replacement value we will not classify that building as <br />structurally substandard. However, if a building does meet the 20% test we will <br />not automatically classify that building as structurally substandard merely <br />because it meets that test. A building that meets the minimum threshold test of <br />necessitating renovation with costs exceeding 20% of replacement value will <br />only be classified as structurally substandard if, in our professional judgment, the <br />types of building deficiencies and the cost to correct the deficiencies satisfy <br />the requirements of section 469.174, subd. 10(c)(1). <br />f We do not count energy code deficiencies toward the thresholds required by <br />Minnesota Statutes, Section 469.174, Subdivision 10(b)) defined as "structurally <br />substandard", due to concerns expressed by the State of Minnesota Court of <br />Appeals in the Walser Auto Sales, Inc. vs. City of Richfield case filed November <br />13, 2001. <br />2. Buildings are not eligible to be considered structurally substandard unless they meet <br />certain additional criteria, as set forth in Subdivision 10(c) which states: <br />"A building is not structurally substandard if it is in compliance with the building <br />code applicable to new buildings or could be modified to satisfy the building code at a <br />cost of less than 15 percent of the cost of constructing a new structure of the same <br />square footage and type on the site. The municipality may find that a building is not <br />disqualified as structurally substandard under the preceding sentence on the basis of <br />reasonably available evidence, such as the size, type, and age of the building, the <br />average cost of plumbing, electrical, or structural repairs, or other similar reliable <br />evidence." <br />Page 6 <br />