Staff recommends approving the variance to Resolution 93-16740 to allow staff to enter into a binding agreement with a seller contingent on the appraisal process outlined in the resolution, Council approval, and any other necessary contingencies. Staff requests this variance for the City Hall Facilities and land adjacent to the Billings Operations Center.

Resolution 93-16740 requires a specific appraisal process and for City Council to establish fair market value based on those appraisals prior to staff entering into any binding agreement to purchase property, regardless of contingencies.
Resolution 93-16740 is a set of guidelines for purchasing property and does allow for a variance from the guidelines upon Council approval (Section H).

City staff appreciates the value of the appraisal process and does not dispute its merit, however, the requirement to complete that process prior to entering into a binding agreement with the seller places the City at a disadvantage in the negotiating process. First, the City would expend resources to have the appraisals completed with no assurance that the property would not be sold to another party during that process. Second, the City Council’s determination of fair market value would be public knowledge and the seller would have the advantage of knowing the appraised value prior to negotiations on a final purchase price.

Given the stated disadvantages with this process, we believe it is in the City’s best interest to complete the appraisal process after an agreement on price has been reached with the seller. The agreement would be contingent on the City’s appraisal process and City Council’s approval of the appraisals and the purchase price along with any other necessary contingencies. This process gives the City two key advantages when purchasing property. First, it allows the City to secure a contingent interest in the property prior to expending resources on the appraisal process. An accepted binding offer would prevent another party from purchasing the property while the appraisal process and inspections are completed. Second, it places the City in an advantageous negotiation position to potentially obtain property for less than market value if the seller agrees to the offered price and the market value is determined to be higher through the appraisal process. 

Therefore, we request a variance to Resolution 93-16740 to allow staff to enter into a binding agreement with the seller contingent on the appraisal process outlined in the resolution, Council approval, and any other contingencies deemed necessary for the City Hall Facilities (Stillwater Building) and land adjacent to the Billings Operations Center.


 

City Council may:

• Approve the variance to allow staff to enter into a binding agreement with a seller contingent on the appraisal process outlined in the resolution, Council approval, and any other contingencies deemed necessary.
• Disapprove and staff would have to obtain appraisals and council approval of fair market value per Resolution 93-16740 prior to entering into any binding agreement.

Approval of this variance would allow the City to enter into a contingent purchase agreement for potentially less than the market value determined by the subsequent appraisal process, which could save the City money on the transaction.
Depending on the property, the cost of the appraisal process is estimated at $10,000 to $20,000.