Discussion regarding possible sale of city property located at 116 E Butler Avenue to highest bidder.  
 

The property located at 116 E. Butler Ave. is an excess 7,100 square foot lot initially purchased for Butler Avenue right of way construction improvements in 1991. It is zoned High Density Residential (HR). There is a long history of City attempts to utilize this lot.  The lot is currently being utilized as a dirt lot for neighborhood parking (not managed by ParkFlag). The city has been dealing with issues with the property that is expending city resources, including police and code enforcement.  Staff requests direction to address the short and long-term conditions of this property.

City Housing Section has had the opportunity to evaluate the property and determine the feasibility of repurposing or development in a manner that supports increasing the number of available and affordable housing units, per Resolution No. 2022-52.  All land owned by the City and determined to be available for development will first be considered for housing prior to consideration of other uses, per Resolution No. 2024-11. 

Existing Conditions on Lot
The lot has been used for abandoned vehicles, loitering, and littering. Neighbors have complained about how these conditions negatively affect the health, safety, and vibrancy of the community. These conditions require code enforcement and police resources. Additionally, deeds have been filed in the county records purporting to convey the property to a private entity, requiring additional City Attorney and Staff time to resolve. 

Development Potential for Housing

1. Development of the lot as its own project requires elevating the main structure above the regulatory flood elevation. The difference between existing grade and the regulatory flood elevation is approximately 9 feet. Development under this condition would most likely result in a first floor flood-proofed garage with the living unit(s) above the garage. This is a significant expense relative to the amount of housing the parcel can provide. Conversations with Habitat for Humanity have occurred off and on since 2011, but flood mitigation requirements will always put pressure on the economic viability of housing on this lot as a stand alone project. The regulatory flood elevation is expected to conform closer to existing grade after the completion of the Rio de Flag Flood Control Project. It could be a long wait as all of the stages of the Rio de Flag project would need to be completed, along with FEMA map revisions after the project is fully completed (7+ years). Development of the lot also requires infrastructure improvements including utilities and access.
2. In 2020, conversations were held with the adjacent land owner to partner on a development combining this lot with the two adjacent lots in exchange for either a land swap for the historic house on the eastern parcel or an outright sale at auction of the City parcel with additional affordable housing units commitments in a future development. In order to combine the lots into the property owner's desired development, high-occupancy housing (HOH) would need to be waived on the City property, which is not an option without repealing the HOH regulations (City cannot provide itself a waiver). A combined development may provide the best opportunity to maximize the contribution this parcel makes towards adding additional housing inventory in the City.

Sale Considerations
Real Estate staff estimate an approximate unit value of $20/square foot, or $142,000 if the property is sold at auction without deed or procurement restrictions. An appraisal for sale purposes will be procured if Council provides direction to sell the property. We estimate $1,200 annual taxes collected by the County as unimproved or improved as a private parking lot. If improved into additional HR housing, we estimate it could conservatively contribute $15,000 annually to property taxes.

We have received interest to purchase the property from a neighboring property owner who would maintain private parking for the foreseeable future.

Selling the property does not immediately eliminate the existing conditions the lot faces, however the responsibility and ability to act quickly (tow unauthorized vehicles) without using City resources is increased by selling the property to a private party.

Implications of Restricting Any Sale to the Development of Affordable Housing
While the highest and best use of the property is likely for development of HR housing, any restrictions will impact the property value. Converting City real property into a commitment to develop affordable housing may lead to delays in development of the property. Due to the limited amount of units this lot could support, this is an opportunity cost to staff time which may not maximize staff resources. 

Partnering With a Housing Partner in Development
Because of floodplain challenges (until the Rio de Flag Flood Control Project is completed), any development at this time with a housing partner likely would yield few housing units, and the development cost would be relatively high compared to other opportunities our housing partners already have. 

ParkFlag Management
City staff have investigated turning over the lot to ParkFlag either as an interim solution or as a permanent solution. The main hurdle to ParkFlag management are code requirements. We could not operate the lot as is and would need to pave and stripe the lot. We believe after improvements the lot could park 9 vehicles. The improvement project would likely trigger offsite improvements requiring improvements to the alley pavement. Conservative cost estimates of these require improvements weighed against optimistic revenue projections for the lot indicate any improvement costs would take more than 30 years to recover from the revenue generated from the lot. The economics suggest that is more reasonable to continue to allow informal overflow parking for the neighborhood rather than making a significant financial investment which does not increase the total number of parking spaces for the neighborhood. See Parking Lot Assumptions attachment for further information.

Preventing Access to Parcel
We could fence or bring in boulders to prevent use of the parcel pending long term development.

Direction Sought (options)
1. Does Council want to wait to sell or develop the property until after the Rio de Flag Flood Control Project is completed and FEMA Map revisions have occurred?

• If so, what short-term decisions should Staff consider to mitigate existing conditions on the parcel, if any? Should we prevent access to the lot? Should ParkFlag manage in the interim? Should we pursue a license to manage as a private parking lot? 

2.  Does Council wish to sell or develop the property now? If so, then:

• Does Council want to sell this property? If so, with what conditions, if any?
• Does Council want to partner with an affordable housing partner to develop affordable units on this parcel?
• Does Council want to improve the parking lot and designate ParkFlag responsibility to manage the lot?