At their February 11, 2013, meeting, the City Council adopted Resolution 13-19241 of Intent to Dispose of Property it currently owns at 502 South 33rd Street, which is also described as:

The north 4’ of Lot 10 and all of Lots 11 and 12, Block 206 Town of Billings, in the City of Billings, Yellowstone County, Montana, according to the official plat on file and of record in the office of the Clerk and Recorder of said County, under Document #16312.

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 allowed the City to pursue property sale to recoup the HOME funding of $130,146 provided to Irma House, Inc. for the development of a six-unit transitional home for Irma House II clients. Both parties desire to maximize the property sales price to ensure full repayment of the HOME obligation, repay the City for directly related property expenses, closing costs and realtor(s) commissions, and return any additional proceeds to Irma House, Inc. to allow them to recoup some or all of their equity investment in the property. The property transfer was completed January 2, 2013.

Staff published the Notice of Public Hearing in the Billings Times on February 28 and March 7, 2013, mailed the Public Notice – Disposition of City Property & Call for Sealed Bids to property owners within 300 feet of the subject property, advertised for sealed bids on the City’s website at www.ci.billings.mt.us/CDland, and held the public hearing March 25, 2013.

The City Clerk opened sealed bids March 12, 2013; there were no bids.

Following the public hearing at their March 25, 2013, meeting, the City Council directed staff to continue marketing the property for sale. The property was subsequently listed for sale with Prudential-Floberg Realtors for $195,000.

The City received an offer to purchase the property for $195,000 with several contingencies from PROPRIEDAD LLC on July 18, 2013. City staff has prepared a counter offer that is currently awaiting signature.

In order to effectively implement a reasonable sales process timeline, staff requests that the City Council grant the City Administrator the authority to negotiate and/or execute Buy/Sell Agreements and other documents to facilitate the sale of this property with the specific understanding that this authorization is only granted if the offer adheres to the following:

1.  The sale price must not be less than the total of the following:

• The $130,146 the City must repay HUD as a result of non-compliance with HOME regulations, and
• Any and all directly related City-paid property expenses, including the costs of the appraisal, title report, property taxes, property insurance, recording fees, changing the locks, utilities, etc., and
• Any and all associated realtor commissions for the sale of this property, and
• Any and all City-paid closing costs for this property.

2.  The sale price must fall within the range of the December 18, 2012, appraisal (Opinion of Market Value = $172,200; Cost Approach = $216,000).

The City Council may: 

1. Adopt the Resolution Granting the City Administrator the Authority to Negotiate and/or Execute Buy/Sell Agreements and Other Documents until the Property Sale is Complete, or 
2. Do not adopt the Resolution Granting the City Administrator the Authority to Negotiate and/or Execute Buy/Sell Agreements and Other Documents until the Property Sale is Complete. The City Council would be presented with all offers, counter-offers and other documents pertaining to the sale.  This will slow the sale process and make it more difficult to conclude it. 

Proceeds from the sale of this property will be used to repay HUD $130,146 the City loaned to Irma House, Inc. to develop a six-unit, affordable, transitional home for men with substance abuse issues. Repayment of the $130,146 is required as a result of non-compliance with HOME Program regulations.

The City will recoup from the sale the amount of all directly related City-paid expenses, including the appraisal, title report, property taxes, property insurance, recording fees, changing the locks, utilities, etc. To date, the City has incurred the $2,446.93 (see attached listing for detailed expenditures).

If the property sells for more than $130,146 plus the cost of directly related City-paid expenses, closing costs and realtor commission(s), 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 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, and
• Montana Trust Indentures, and
• 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, and
• 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 six-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, 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, and/or
• The facility is not in compliance with HOME Program requirements, and/or
• 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. At a subsequent meeting with Irma House’s Executive Director, its attorney, and City staff, all parties agreed 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:

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

The City Council adopted Resolution 13-19241 of Intent to Dispose of Property at their February 11, 2013, meeting.