The Downtown Billings Partnership (DBP) Board of Directors recommends that the City of Billings purchase lots 1-7, block 109 of the Original Townsite of Billings, generally located on the north side of Montana Avenue between N. 27th St. and N. 28th St. (Broadway).  The property contains a three story office building (Windsor Court) and a surface parking lot where the Empire Bar was formerly located.  The property would be purchased as part of the land assemblage for a new, 500 space public parking structure, presently being called the Empire Parking Garage.  The purchase price would be the review appraisal amount, presently estimated to be $1,650,000.  The final appraisal review will be completed prior to April 15th.  The proposed closing date is May 2, 2011.  The funding sources would be Tax Increment and Parking reserves. 

The City Council may:

• Approve the property purchase.;
• Decline to purchase the property and not construct a new parking garage at this time and this location; or
• Delay the purchase after determining whether the property owner is willing to close at a later date.

Per Resolution No. 93-16740, the City staff requested two real estate appraisals and a review appraisal for the property purchase.  The review appraiser will deliver his work no later than April 15, so the final purchase price is not known. However, the two primary appraisals are within $125,000 of each other and the average of the two is $1,650,000. 
The proposed sources of funds for the purchase are approximately $1.5 million from the N. 27th Street Tax Increment District and $1 million from the Parking Fund.  There are sufficient funds to accomplish the purchase, however, additional large downtown public improvement projects will not be possible for the remainder of the year.  Depending on the Council's decision on two other associated items, there may not be funding available for other large projects until the increment grows substantially higher and parking reserves are replenished.  The parking contribution uses all of the discretionary reserves and the tax increment contribution equals almost 80% of the tax year 2010 increment. 

The two associated items are purchasing additional property and constructing a new parking garage.  The other property is the remainder of the 1/2 block, being the Northern Hotel parking structure.  That property is located on the west 5 lots of the block and its estimated purchase price is $900,000.  After the property is secured, the DBP will propose that the City bond for constructing a 500 +/- space parking structure.  That structure could cost $11 million to $17 million.  If the Council approves that proposal, the bond debt service will require commitment of over half of the annual tax increment income, sale of the Park IV structure and $100,000 per year contribution from the parking fund. 

In addition to the land acquisition and garage cost, the Northern Hotel developer is asking for a tax increment grant to reimburse him for eligible public improvements costs.  Those improvements include curb, gutter, sidewalks, utilities and the building facade.  The grant could total approximately $2.1 million spread over as many as 20 years.  Beginning with an annual increment of $1.9 million and deducting $1.1 million for garage debt service, $300,000 for the DBP management agreement and $100,000 of other committed expenses, there will be about $400,000 per year available for spending on public improvements.  The proposal is to pay the developer 45% of the available annual increment, which would equal $180,000.  That leaves approximately $220,000 per year for all other downtown improvement projects. 

In 2009, the City contracted for and received a parking demand study.  Its primary purpose was to identify areas in the downtown that have the highest demand for additional public parking.  The study indicated that there are two or three downtown locations where the City should consider building a new parking structure.  The area around the new Federal Courthouse and at 4th and Broadway were identified as high priority but not having immediate parking needs.  The area near a proposed downtown convention center on Montana Avenue was the highest potential demand site.  The study estimated that there would be a 500+/- parking space deficiency at this location within 5 years, but only if a convention center is constructed (see Section 5 Summary Recommendations, page 62). 

After obtaining the study, the Downtown Billings Partnership (DBP) contracted for a convention center market study.  The study indicated that the city, specifically downtown, can support a 25,000 sq. ft. convention center.  It should be constructed, owned and operated by one of the downtown hotels.  The DBP approached those businesses to determine their interest in a convention center and a new parking structure to support it.  None of the hotels or other businesses have committed to building and operating the convention center but the DBP is still working with them to develop that interest and commitment. 

The preferred parking structure location is on Montana Avenue between N. 27th and N. 28th (Broadway).  That structure would contain approximately 500 spaces and approximately 18,000 sq. ft. of retail space on the ground floor, facing Montana Avenue.  Alley Cat Investments (owned by Bill Honaker) obtained an option to purchase the Windsor Court property (NW corner of N. 27th & Montana Ave) in 2005. That option expired on March 31, 2011, so Alley Cat exercised the option and will purchase the property later this spring unless the City buys it before it transfers to Alley Cat.  

Alley Cat and the owner of the Windsor Court building jointly purchased the Empire Bar and adjacent properties.  The bar and an adjoining building were razed a few years ago to create a surface parking lot.   Alley Cat has an option to purchase the other owner's interest in the property, which is subject to the same conditions as the adjoining building.

City Resolution No. 93-16740 sets property acquisition standards.  Two appraisals and a review appraisal are required due to these properties' values.  DBP contracted for an appraisal and the City contracted for the other appraisal and the review appraisal.  The two appraisals indicate the value of the Windsor Court and the parking lot to be approximately $1,650,000.  The review appraiser will deliver his report no later than April 15th and Alley Cat has agreed to accept the review appraisal price. 

The purchase agreement sets a number of conditions for the property sale.   The principal ones are:

• $15,000 earnest money deposit that is forfeited if the City does not close;
• Design approval for the new garage;
• City allows 25 ground floor parking spaces in the new garage to be leased for approximately $4,300/space;
• Option to purchase the east corner of the retail space for the market price to be determined later;
• Free lease of 25 spaces in the surface lot until the City begins garage construction;
• If the City fails to construct the new garage within 2 years, Alley Cat may reacquire the property.