Staff recommends City Council approve the lease agreement between the City of Billings and CapeHon Development, LLC for continued use and operation of the Park 3 Parking Garage. If City Council approves this lease agreement, it will be executed at the time of closing of the Purchase and Sale Agreement.

The Park 3 Parking Garage, located at 210 N 27th Street, has historically served as an asset in the City’s downtown parking inventory, supporting local businesses, City operations, and general public access. In 2024, CapeHon Development, LLC will acquire the former City Hall site, including the Park 3 structure, as part of a larger redevelopment initiative.

Following the sale, staff entered into negotiations with CapeHon to establish a lease arrangement that would allow the City to maintain uninterrupted public parking services during redevelopment of the surrounding properties. The proposed lease agreement provides the City with exclusive use of the Park 3 Parking Garage, the secured lower-level parking area, and the attendant station, with the right to continue leasing individual spaces to third parties.

Key terms include:
Term: Two years, expiring two years from the date of closing. No automatic renewal or notice required for termination.

Rent: $12,231.25 per month, with prorated rent for partial months.

Utilities: $1,495.00 per month, based on 274 parking spaces and 8,878 square feet of gas-heated area.

Taxes: The City will pay property taxes directly or reimburse the landlord for taxes assessed on a pro rata basis.

Insurance: The City will continue to insure the entire combined property (including adjacent Old City Hall and Administrative Building) under its blanket policy and will receive monthly reimbursement from the landlord for their share.

Maintenance & Repairs: The City is responsible for routine maintenance, snow removal, and specific capital repairs outlined in Exhibit B. Note that the items highlighted in Exhibit B were completed during the contractor’s most recent mobilization at a cost of $46,550. Structural repairs, roof, and major systems are the landlord’s responsibility unless damage results from tenant negligence.

This agreement aligns with the City’s downtown plan by ensuring the continued availability of structured parking and supporting downtown economic activity during property transitions.

City of Billings – Parking Division: Maintains operational control of Park 3, ensuring public access and parking management.
CapeHon Development, LLC: Property owner and landlord. Seeking redevelopment of adjacent properties while enabling continuity of municipal parking services.
Downtown Businesses and Patrons: Rely on Park 3 for convenient parking access; disruption could negatively affect economic activity.
City Departments and Employees: Continue to utilize secured parking and support operations in the downtown core.

City Council may:
Approve the lease agreement as presented.
Approve the lease agreement with modifications.
Decline to approve the lease agreement, requiring renegotiation or alternative arrangements for parking service.

The lease will result in the following anticipated annual costs:
Base Rent: $146,775.00
Utilities: $17,940.00
Total Annual Lease Costs: $164,715.00

Additional obligations include:
Property taxes (estimated, subject to annual billing)
Insurance (net of landlord reimbursement)

All costs are accounted for in the Parking Division’s operating budget.

Approval of the lease agreement ensures continuity of public parking operations in Park 3 during a critical redevelopment phase for downtown Billings. The lease reflects fair-market terms, clearly delineates responsibilities, and preserves the City's ability to maintain a vital public service without interruption. Staff recommends approval to secure stability for downtown access and public convenience over the next two years.