Staff recommends Council approves removing the contingencies on the buy/sell agreement to proceed with the purchase of the property located at 6014 S. Billings Blvd for $1.13 Million

The Billings Operations Center consists of six buildings located on approximately 16 total acres near the intersection of Midland Road and South Billings Blvd. The BOC complex was completed in 2004 to meet the City's needs at the time, but operational needs are growing as the City expands. With the exception of 2.2 acres adjacent to the newly expanded evidence facility, the property is entirely developed. To accommodate future growth, the City will need additional property to expand the facility and acquiring property directly adjacent to existing facilities is more economical than developing a separate site.

The subject property is located at 6014 South Billings Blvd and consists of approximately 20 acres of agricultural land bordering the BOC's south property line. The property also includes a house and three accessory buildings: garage, shed, and shop building. The property has three different road access points on S Billings Blvd, Songbird Dr, and Maggie Ln.

This property is the most feasible option for future growth of the BOC facilities. City staff has negotiated with the sellers pursuant to the variance to Resolution 93-16740 approved by Council on July 13, 2020. The asking price was set at $2.5 million, however after negotiations, the seller has agreed on a sale price of $2.1 million with closing costs split between buyer and seller.

At the August 10, 2020 meeting, Council approved entering into a contingent buy/sell agreement with the seller with a purchase price of $2.1 million.

The Facilities Division has completed the following due diligence: 
- Phase 1 Environmental Report, which showed a small area of contaminated soils adjacent to the shop building.

- 2 Appraisals and a review appraisal to determine a market value of $1.13 million. The two appraisals ranged from $1.13 million to $2.1 million. The review appraiser determined that the higher appraisal was considering a 'specific user' versus a 'typical marked participant.' Therefore, the review appraiser concluded that the higher value was not supportable and that the lower valued appraisal of $1,130,000 best supported the appraiser's opinion of value. (See attached appraisal summary).

- Geotechnical Soils Investigation, which indicated the site consists of highly compressible lean clay soils, which are not ideal for conventional construction methods. Additional subgrade preparation or deep foundation systems would likely need to be utilized for any construction on the site.

There were further negotiations based on the appraisals and investigative findings and the following terms were agreed to by both parties:
- Sale price of $1.13 million
- Seller will remediate contaminated soils discovered during the environmental survey

City Council may:

• Vote to remove the contingencies to allow the sale to move forward with the new terms, or;
• Not approve the removal of contingencies and give further direction to staff. Further options include: executing a contingency to release the City from the agreement, or pursue further negotiations. The contingency release date in the buy/sell agreement is January 12, 2021.

The cost of the property is not budgeted in FY21. The initial purchase will be made by the General Fund and reimbursed by City Departments based on future use as dictated by a master plan. See attached purchase plan memo.
Removal of the existing buildings is estimated at $50,000.
Purchase of the land is a capital investment in the future. Failure to obtain the property would limit growth opportunities at the current BOC site and could lead to unknown, potentially significant costs in the future.