The Billings Operations Center (BOC) on Midland Rd. opened in July 2004.  The two lots on the south side of the street, which total 16 acres, house vehicle storage and repair facilities, offices, multiple outbuildings and the Police Department training facility (PD1).  The 5.8 acre lot on the north side of Midland contains the Police evidence building and yard (PD2).  The south lots are fully developed and the north lot is over 1/2 developed, so the only way to plan for future growth is to buy additional land.  Staff submitted a purchase agreement for a 2.3 acre lot adjacent to and east of PD2, contingent on appraisal and Council approval, and the seller accepted the offer.  Staff requests that the City Council consider purchasing the property from Renee Boyer, et.al. for the offered price of $600,000.

The City Council may agree to purchase the lot, not approve its purchase or may direct staff to purchase other adjacent or nearby property.  The advantages and disadvantages of each option are described in the Background section of this report.

The City borrowed money to pay for a portion of the BOC land and construction cost. Tenant departments pay an annual fee to repay the loan, except for the Solid Waste Division, which paid cash instead of financing its portion of the cost. The tenants that pay the fee include the Police Department, the Parks, Recreation and Public Lands Departments, the Street and Traffic Division and Fleet Services. Staff proposes to use $600,000 from the General Fund reserves to purchase the new property. 

The City recently refinanced the BOC debt and the savings equal about $45,000/year for the next 10 years.  Those savings will partially offset the amount of reserves that are used to pay for the new property.

The City occupied an operations center on Edward Street for decades.  In 2002, the City sold about 18 acres of its land and buildings to its neighbor, Sysco, Inc. for the company's expansion.  The City purchased approximately 24 acres on S. Billings Blvd. at Midland Road, subdivided the property and built the public infrastructure to serve a new operations center.  The $14.5 million project was financed with the proceeds from the land sale to Sysco, a grant, reserves and by borrowing $6.5 million.  The BOC was built and occupied in 2004. 
Since that time, almost all tenants' space needs have grown.  For example, the yard waste collection program started after 2004 and has required Solid Waste to purchase 6 additional trucks that must now be stored and maintained.  The BOC yard also has to accommodate new and/or replacement barrels that the program uses.  In 2009, Fleet Services assumed maintenance responsibility for the 150 pieces of Fire Department equipment that were formerly maintained in a different location.  This change required hiring 1.5 FTE mechanics with specialized training and creating two additional vehicle repair bays in spaces that were formerly used for material storage.  In turn, this forced construction of a material storage lean-to building near the shop, which consumed former vehicle maneuvering and storage space.    
The land for the BOC is composed of three (3) lots; 16+/- acres in two lots on the south side of Midland and one 6+/- acre lot on the north side.   The City development on the south side of Midland cannot expand east or west.  However, there is agricultural land south of the complex.  The property that is on the north side of Midland cannot expand west.  There is vacant and available land on this lot's east side.

City staff started the discussion about land for future expansion by looking at the property that is south of the main BOC buildings.  That property is 20 acres and includes a residence.  The property owner would probably not agree to sell anything less than the entire property and staff does not believe that it needs that much additional land.  However, sometime in the future, the residence and property nearest S. Billings Blvd. could be separated from the land that the City needs and could be sold for commercial development.  The purchase price would be at least $2,000,000.  In addition to not needing this much land, staff does not recommend using that much money from any tenant department's reserves or to incur that much additional debt. 
City staff then considered purchasing the lot that is north of Midland and east of PD2.  This is one of the lots that the City created in the BOC Subdivision and exchanged in order to acquire enough property for the main BOC campus on the south side of Midland.  It is a lot that contains 2.3 acres, or approximately 100,000 sq. ft.  The land has been listed for sale at $10/sq. ft.  With the assistance of real estate professional Charlie Hamwey, staff determined that the land is worth approximately $6/sq. ft., or a total of $600,000.  That value has been confirmed by two real estate appraisals.  The City's policy is to have a third appraiser review the first two appraisals, but that is an extra expense and time that staff does not believe is warranted in this case because the two appraisers independently assigned nearly identical values to the land.  Staff does not believe that a review appraiser will find significant errors in the two appraisals or different comparable properties to use as a basis for valuation.