The City Council will consider adopting a Resolution of Intent to sell property located at 502 South 33rd Street, Billings, Montana.  The property  was the former Irma House II, a non-compliant U.S. Department of Housing and Urban Development (HUD) HOME Investment Partnership (HOME) project.
 
Irma House, Inc. and the City of Billings signed a Voluntary Agreement, dated September 6, 2012, for Irma House, Inc. to vacate said property by January 2, 2013, and transfer ownership by Warranty Deed to the City of Billings. This allows the City to pursue property sale to recoup the HOME funding of $130,146 provided to Irma House, Inc. for the development of a 6-unit transitional home for Irma House II clients. The property transfer was completed January 2, 2013.
 
If the property sells for more than $130,146, plus the cost of the appraisal, closing costs, recording fees, and other directly related expenses, the remainder will be transmitted to Irma House, Inc. to enable the organization to recoup some or all of their equity investment in the property.

The City will recoup from the sale the amount the City paid for the appraisal, closing costs, recording fees, and any other directly related expenses.
 
Staff recommends offering the property for sale. If the City Council adopts the Resolution of Intent to dispose of the property, staff will advertise for sealed bids, notify surrounding property owners about the pending sale, and schedule a public hearing for March 25, 2013, at which time the Council would consider the bids and hear comments on the proposed property sale.

The City Council may:

• Adopt the Resolution of Intent to sell the property, request and accept sealed bids, and conduct a public hearing on March 25, 2013, to consider selling the property to bidders, or

• Not adopt the Resolution of Intent. The City would continue owning the property and will be responsible for repaying HUD the full $130,146, plus the City would be responsible for maintaining the property, insuring the property, paying utilities, etc.

There is no financial impact from adopting the Resolution of Intent. Notifying surrounding property owners and publishing the notice of public hearing costs will be offset by the property purchase price. A more thorough analysis of pricing and costs will be provided at the time of the public hearing.

The City of Billings and Irma House, Inc. signed and recorded a series of legally enforceable documents between January 2003 and April 2005. These documents included:

• Deed Restriction Agreement stating the City of Billings loaned $30,000 in HOME funds to Irma House, Inc. for the purpose of providing assistance for the acquisition and site clearance costs for the property located at 502 South 33rd Street, Billings.
• Montana Trust Indentures.
• HOME Community Housing Development Organization (CHDO) Construction Development Agreement that states Irma House, Inc. received a loan of $98,966 to build affordable transitional housing on property at 502 South 33rd Street.
• Deed Restriction Agreement stating the City of Billings loaned $98,966 in HOME funds to Irma House, Inc. for the purpose of new construction of a 6-bedroom transitional housing project commonly known and addressed as Irma House II, located at 502 South 33rd Street.

  Although the City of Billings only provided loans to Irma House for a total of $128,966 ($30,000 in 2003 plus $98,966 in 2005), it is the total HOME investment of $130,146 that must be repaid to HUD as a result of non-compliance with HOME regulations. See attached list of Irma House II project expenditures.

There are no “forgiveness provisions” included within the Deed Restriction or Trust Indenture documents.Therefore, notwithstanding the non-compliance issues outlined below, these zero interest, deferred loans become due and payable to the City of Billings under one or more of following conditions:

• The properties are no longer used as Irma House transitional housing for men with alcohol and/or other substance abuse issues,
• The facility is not in compliance with HOME Program requirements,
• The properties are refinanced, and/or
• The properties are sold.

Irma House, Inc. was notified via certified mail on May 17, 2012, that the City of Billings Community Development Division considered Irma House II to be in substantial non-compliance with HOME program regulations for the following reasons:

1. The original 6-rental units in the home have not been completed to date, and
2. Irma House’s Executive Director is the only resident of the home.

As a result, the Community Development Division required Irma House to make the following changes within 90 days (by August 17, 2012):

1. Finish the 6-rental units as specified within the HOME Development Agreement, and
2. Move eligible low-income tenants into the units.

 On August 14, 2012, City Staff comprised of the City Administrator, the City Attorney, the Director of Planning & Community Services Department, the Community Development Division Manager, and two Community Development Division staff members met with Jake Romero, President of Irma House, Inc., and their attorney, Benjamin C. Sanchez, to discuss the non-compliance issues. As a result of this meeting, it was agreed by all parties that Irma House, Inc. would voluntarily vacate the property so the City could pursue the sale of the property to repay HUD the HOME funds provided.
 
A Voluntary Agreement dated September 6, 2012, was signed by all parties. The agreement stipulates the following: With the signing of this Voluntary Agreement by the parties to this transaction, the following was acknowledged:

• The City of Billings does not have the right of condemnation of eminent domain, and therefore, will not acquire the property through the use of eminent domain if negotiations fail to result in an amicable agreement; and
• An estimate of the Fair Market Value of the property will be established by appraisal and the fair market value will be provided to both parties. Irma House, Inc. will provide the appraiser access to the property and all structures on the property with 48 hours notice; and
• The City will advertise and sell the property using established City policies and procedures. If the property is sold for more than $130,146 plus the cost of the appraisal, closing costs, and expenses incurred by the City to sell the property, the remainder will be transmitted to Irma House, Inc.; and
• Irma House, Inc. will remove all personal property from all buildings on the property by January 2, 2013. Any remaining items on the property after this date become the sole property of the City to dispose of in any manner deemed appropriate by the City; and
• Both parties desire to maximize the property sales price to ensure full repayment of the HOME obligation and return Irma House, Inc.’s equity investment in the property. Therefore, Irma House, Inc. will not remove appliances, cabinets, light fixtures, siding, or any other items currently affixed to the house and steel building nor will Irma House, Inc.  damage the property and/or structures prior to transferring the property to the City of Billings; and
• City staff will prepare a Warranty Deed to transfer the property from Irma House, Inc. to the City of Billings that will be signed, notarized, and recorded on January 2, 2013; and
• Irma House, Inc. will pay all utilities, property taxes, insurance, and maintenances costs until the Warranty Deed is executed.
   

Irma House, Inc. signed the Warranty Deed and Realty Transfer Certificate on January 2, 2013, and the City took possession of the property.

The Community Development Division is following established City policies and procedures to dispose of this property. The Resolution of Intent to Dispose of Property is the first step toward this end.

The Community Development Division will adhere to Billings Municipal City Code (BMCC) Section 22-900 - sale, disposal or lease of city property.