Alternatives, Inc. is a non-profit community prerelease center located in Billings which provides various services involving male and female criminal defendants. In April 2006, Alternatives applied for a Special Review permit relating to a second floor assessment center it operates in the former Howard Johnsons Hotel on South 27th Street known as Passages. The Special Review was granted by the Mayor and City Council on May 22, 2006. One of the conditions of approval imposed a "PILT" or payment in lieu of taxes assessment in the amount of $40,000.000 per year. Alternatives challenged the legality of this condition as part of a Special Review application and eventually filed civil litigation against the city arguing that the PILT had no relationship to mitigating any potential negative land use impacts of the second floor assessment center within the Passages building. Since the filing of this litigation, several discussions have occurred between Alternatives and the City as to how the matter can be resolved. The Mayor and Council have been briefed on and advised of options concerning the case several times and in late 2009 ultimately determined that the best course of action is to eliminate the PILT as a condition of Special Review approval if Alternatives agreed to dismiss its case against the City with each party bearing their own litigation costs and attorneys fees. All other Special Review conditions imposed on this facility would remain in effect. Alternatives and its Board of Directors have agreed to this disposition and recently submitted two related documents that resolve this case: 1) a modified Settlement Agreement and Mutual Release that formally settles the case and 2) a Stipulation and Order of Dismissal with Prejudice which will be submitted to the presiding District Court Judge for approval and signature. These documents have been previously reviewed and slightly modified by the City Attorney, are acceptable in their present form and are included with this memo as Attachments One and Two respectively.

The Council may:
1. Approve the settlement and dismissal of the case with prejudice; or
2. Disapprove the settlement and dismissal, and proceed with the current litigation which would likely be resolved through cross motions for summary judgment.

The financial impact to the City is prospective because the $40,000 annual PILT payment imposed as a Special Review condition has not been paid annually due to the litigation challenging its assessment. Approval of the settlement and dismissal of the case will eliminate this prospective annual payment.

Staff recommends that the Council approve the settlement and dismissal of this case and authorize the Mayor and City Attorney  to execute the attached Settlement Agreement and Mutual Release. (Attachment One).