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HomeMy WebLinkAboutPublic Hearing to determine whether the Story Mansion needed for public use or public interest furthered by selling.pdf Page 1 of 7 Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Chris Kukulski, City Manager SUBJECT: Determine whether the Story Mansion is not needed for public use, or that the public interest may be furthered by selling the property. MEETING DATE: August 15, 2011 AGENDA ITEM TYPE: Action/Public Hearing (4/5 vote of the Commission required) INTRODUCTION: On August 1, 2011, the City Commission adopted a motion “authorizing the City Manager to enter into negotiations regarding the sale of the Story Mansion property to Exergy Friends of the Story Mansion, Inc for $391,222.00 and schedule public hearings to facilitate the sale of the Story Mansion consistent with the Bozeman Municipal Code.” The next step in this process requires the city to conduct a public hearing to determine whether the Story Mansion and related facilities are needed for public use, or, in addition, whether the public interest may be furthered by selling the property. It is important to note that Exergy Development Group (Exergy) is the entity which submitted the attached proposal. However, the local non-profit organization Friends of the Story Mansion (Friends) is in the process of partnering with Exergy and should the Commission proceed further with the sale of the property, amending its bylaws to become Exergy Friends of the Story Mansion (EFSM). The formal establishment of EFSM must be completed prior to the closing. The sale of the property to EFSM is being proposed pursuant to 2.05.030.D, BMC: “If the city owns property containing a historically significant building or monument, the city may sell or give the property to non-profit organizations or groups that agree to restore or preserve the property.” Under the city’s RFP process (explained below) and Exergy’s proposal EFSM will agree to both restore and preserve the Story Mansion and Carriage House. This evenings agenda is to discuss whether the sale will further the public interest and whether the property is necessary for the conduct of City business or preservation of its property. It is important to note this determination is NOT a final decision on the sale of the property. Whichever method of disposition the City Commission determines appropriate, i.e. negotiated sale or request for proposals, will require several additional steps including, at a minimum, the adoption of an ordinance approving a purchase and sale agreement with all corresponding opportunities for public involvement. 282 Page 2 of 7 RECOMMENDATION: Staff recommends the Commission hold a public hearing and consider this staff memorandum and written and spoken public testimony. We recommend the Commission, by a two-third majority (i.e. four affirmative votes) determine: 1) The Story Mansion is a historically significant building; 2) The soon-to-be constituted EFSM will be, at the time of the sale, a qualified non-profit organization and EFSM will, pursuant to a purchase and sale agreement and conditions of sale, agree to restore and preserve the Story Mansion, Carriage House, and grounds; 3) Based on the proposal submitted by Exergy, and as discussed herein, the original intent of the City’s purchase of the Story Mansion property (to preserve the historical significance of the Story Mansion) will be enhanced by ownership by EFSM and as such the Story Mansion, Carriage House, and grounds are no longer necessary for the conduct of city business or the preservation of city property; 4) Based on the proposal submitted by Exergy and as discussed herein, the public interest will be furthered by selling the Story Mansion property to EFSM; 5) That City Manager is authorized to enter into direct negotiations with EFSM in order to facilitate the sale of the Story Mansion property pursuant to 2.05.030.D, BMC; and 6) Based on an opinion from the City Attorney that a certified real estate appraisal is not required when the City sells real property pursuant to 2.05.030.D, BMC, that city staff not obtain a certified real estate appraisal of the subject property. SUGGESTED MOTIONS: Main motion: Having conducted a public hearing, considered written and spoken public testimony and based on the findings contained in the staff memorandum and findings articulated by the Commission during discussion, I hereby move: That the real property known as the Story Mansion (Lot 1A-1 Amended Block 3 of Butte Add Lot 1A Block 3) located at 811 South Wilson Avenue is a historically significant building and that: 1) Sale of the Story Mansion pursuant to the requirements of 2.05.030.D, BMC, to the soon- to-be constituted Exergy Friends of the Story Mansion is in the public interest and based on the proposal from Exergy and conditions of the sale requiring reversion to the City if Exergy Friends of the Story does not preserve and restore the property the Story Mansion is no longer necessary for the conduct of city of Bozeman business or the preservation of City property; and 2) The City Manager is hereby directed to proceed with direct negotiations regarding the sale of the Story Mansion property to EFSM consistent with the Exergy’s submittal on the RFP and Bozeman Municipal Code. Additional possible motion: If the Commission is interested in having a certified real estate appraisal conducted for the property, I suggest you also consider the following motions: 283 Page 3 of 7 1) Direct the City Manager to obtain a certified real estate appraisal of the property prior to first reading of an ordinance authorizing the City Manager to enter into a purchase and sale agreement with EFSM for the sale of the Story Mansion property. AUTHORITY TO SELL REAL PROPERTY: The City Commission has authority over property owned by the city pursuant to Chapter 2.05 of the Bozeman Municipal Code (BMC) (Attachment 1). This chapter was created by Ordinance 1658 (2006) and later amended by Ordinances 1683 (2006) and 1713 (2007). The BMC requires the following when the city of Bozeman sells real property: 1) The City must conduct a public hearing and determine by a two-thirds vote of all members of the Commission that any real property owned by the city is “not needed for public use, or that the public interest may be furthered…” (2.05.040, BMC). In addition, section 2.05.030.A, BMC, authorizes the City Commission to sell property “however acquired” that is “not necessary to the conduct of City business or the preservation of its property.” 2) The City may sell property containing a historically significant building to a qualified non-profit organization if that organization agrees to restore or preserve the property. 2.05.030.D, BMC. This section of the municipal code requires the contract for the transfer of the property to contain a provision that: a. Requires the property to be preserved in its present state or restored state upon any subsequent transfer; and b. Provides for the reversion of the property to the City for non-compliance with conditions attached to the transfer. 3) The City may sell property using several listed methods: bid, auction with reserve, or negotiated sale or exchange, 2.05.040. 4) According to the City Attorney, for sales pursuant to 2.05.030.D, BMC, the City need not conduct an appraisal of the property prior to the sale of a property containing a historically significant property if the sale comports with the requirements of that section. 5) The City Commission may deposit the proceeds from the sale “in any account that is in the best interest of the city.” 2.05.070. 6) The sale of real property must be approved by an ordinance. Bozeman Charter, Sect. 2.11(5). BACKGROUND AND FINDINGS: As demonstrated herein, the sale of the Story Mansion, Carriage House and grounds to EFSM is in the public interest. In addition, because EFSM will be contractually bound to restore and preserve the property the initial purpose behind purchase of the property in 2003 will be ensured. The attached City Commission minutes of the March 31, 2003 outline the Commission’s desire to protect this historic treasure which appears to have originated by a “request from the Historic Preservation Advisory Board that the City purchase the Story Mansion” in order to protect this historic and cultural asset. The following information provides information for background purposes and also provides findings related to the requirements of the Bozeman Municipal Code. 284 Page 4 of 7 The Story Mansion is a historically significant property and has contributed greatly to the history of the south side of Bozeman and the City generally. The City’s successful application for a Save America’s Treasures grant summarized the history of the Story Mansion as follows: The impressive Mansion and Carriage House were built in 1910 for T. Byron Story, one of the sons of Nelson Story (who is considered one of the most successful Montana pioneers and responsible for the first cattle drive from Texas to Montana). Both structures are noted as contributing in Bozeman’s Bon Ton Historic District (Smithsonian #24GA0954), not only due to their direct association with the Story family but also due to their unique mixture of architectural elements from the Queen Anne, Tudor and Shingle styles and their physical location on an entire City block. The Story family only resided at the property for twelve years when it was sold in 1922 to Sigma Alpha Epsilon (SAE) fraternity, which was organized at Montana State College in 1919. SAE retained ownership until 2003, when the property was transferred to the City of Bozeman in the spirit of preservation. With the introduction of the SAE fraternity, the upper and basement floors of the Mansion were modified to accommodate fraternity dwelling areas. The Carriage House was also altered to provide several rooms for fraternity members. Though such modifications occurred, the Mansion retains remarkable high integrity and several of the original interior features remain in good condition. Through the work of the Story Mansion Task Force (SMTF) and the generous support of Montana’s Senators, the T.B. Story Mansion and Carriage House has gained the recognition it deserves, by local, state and federal agencies. Since the City purchased the property, it has always been a possibility that the property could be sold to a private entity so long as the sale ensured the long-term preservation and restoration of the property. This is evident from discussion held prior to the purchase of the property in 2003. During the process to purchase the property, the Bozeman Historic Preservation Advisory Board provided a report to the Commission entitled Saving the T.B. Story Mansion: A Historic Plan for Purchase, Permanent Protection, Restoration, and Public Use. See Attached. This report, at pg. 4, recognized: “Should the community fail to raise the funds as part of this challenge, the city then would have the option to list and resell the property to a private buyer. Even under this scenario the public who has an abiding desire to preserve the historic integrity of the site wins. The deed restrictions insure the Story property will never be carved up into individual lots and no matter who owns the property in the future, history is preserved.” In addition, in December of 2008, when the City awarded a contract to restore the first floor of the mansion building the Commission adopted a motion specifically recognizing the property may, at some time, be sold: “Authorize the City Manager to sign the Award of Bid to R & R Taylor Construction as the General Contractor/Construction Manager in the amount of $1,071,242 as authorized by the 2008-2009 budgets and direct staff to bring back the necessary budget amendment from the General Fund not to exceed $391,222 285 Page 5 of 7 to be paid back within 24 months either through fundraising or by selling the mansion starting on January 1 of 2011 (originally stated 2010 but he clarified later on in discussion.” Based on the above, and the minutes of the Commission during the initial purchase in 2003, it is clear the Commission has consistently considered the possibility of selling the property to a private entity who would agree to preserve and restore the property. As such, the current proposal is not in conflict with the intention of the Commission throughout the City’s ownership and as such, the sale of the property will further the public interest and not be contrary to the preservation of city property. As additional background to the process, on April 18, 2011, during discussions with the Friends of the Story Mansion regarding FOS’s previously pledged monies and the possibility of entering into a MOU for the fulfillment of that pledge, the City Commission adopted the following motions after three entities (Friends of the Story Mansion, Thrive and Exergy) expressed interest in taking on the challenging task of owning and managing the Story Mansion property. The Commission’s motions were as follows: Vote on the main motion as amended to investigate the transfer of property to other entities including the two entities that have preliminarily proposed tonight and direct staff to return to the Commission in a brief period of time (within 2 weeks) the specific elements we expect to be addressed in a proposal to be returned to the Commission in no later than 90 days (from today) for final decision. Those voting Aye being Crs. Becker, Taylor, Mehl, Andrus and Mayor Krauss. Those voting No being none. The motion passed 5-0. Motion and Vote to require the City Manager to invite Thrive and Exergy to propose and to make clear that nothing in the agreement with the Friends of the Story interferes with their proposal. It was moved by Cr. Becker, seconded by Cr. Taylor to require the City Manager to invite Thrive and Exergy to propose and to make clear that nothing in the agreement with the Friends of the Story interferes with their proposal. Those voting Aye being Crs. Becker, Taylor, Mehl, Andrus and Mayor Krauss. Those voting No being none. The motion passed 5-0. As a result of this direction, the staff developed a “Requests for Proposals” and advertised the document on the City web page and in the Bozeman Chronicle on May 1, May 8, July 3, and July 10, 2011. See attached. Only Exergy officially responded to the RFP. See attached. In summary, their proposal states the following: “Exergy Development Group (EDG) hereby proposes joining with Friends of the Story, Inc. to create a non-profit organization combining the resources, talent, experience, and commitment of Exergy Development Group, LLC and Friends of the Story, Inc., in order to purchase the Story Mansion, an accessory detached Carriage House, and the grounds on which they are located for $391,222. It does so with the understanding that the newly constituted non-profit organization (presently referred to as Exergy Friends of the Story - 286 Page 6 of 7 EFSM) shall preserve and restore the Property within a five-year period of time and operate the first floor of the Mansion principally as a public community center in a manner substantially similar to its current use. It is understood as well that the Property is subject to existing 50-year and five-year historic preservation easements, both with the State of Montana, and EFSM agrees to comply with all requirements of these existing easements. Since the preservation and restoration of the Property and the public use and enjoyment of the first floor of the Mansion is the over-riding concern of EFSM, it shall ensure that any subsequent purchaser of the Property, in the unanticipated event of sale, shall respect all of the requirements and conditions now in place, although they are a matter of statute and law.” Exergy’s proposal answers each of the six criteria as requested in the RFP. The proposal meets both the letter and spirit of what the City has been searching for over the past seven years. Exergy indicates the EFSM commits to renovating the remaining portions of the property (2nd and 3rd floors and Carriage House) by 2016 and also operating the first floor of the Mansion principally as a public community center in a manner substantially similar to its current use. Upon completion of the initial restoration work, the City began operating the first floor of the Mansion as a community center and sale of the property to EFSM pursuant to the proposal and required conditions of sale will not undermine this purpose; in fact, one of the requirements of the purchase will be to maintain the availability of the first floor as primarily a community center. The Exergy through its proposal agrees to do so. The public interest will be served in selling the property to EFSM because EFSM has indicated it will invest significant funds to restore and preserve the property whereas the City, due to financial constraints, has not and most likely will not set money aside for long term maintenance of the recently renovated portions of the property or for the future renovations of the second and third floors and carriage house. These future needed renovations, combined with ongoing maintenance and operations costs associated with the buildings and grounds will likely cost millions of additional dollars. Expending additional monies to the extent necessary to restore the buildings is not anticipated to be a major overall funding priority for the City. In addition, the property, if restored and managed according to the Exergy proposal, will no longer necessary for the conduct of city business. The proposal indicates EFSM will own and manage the property with the same underlying purposes as led the City to purchase the property in 2003. As stated above, because the Commission is considering selling the property pursuant to 2.05.030.D, BMC, the contract for the sale of the property will require reversion to the city if EFSM, or subsequent purchasers, do not comply with the requirements of preservation and public access. This factor is important in knowing that the Story Mansion will be preserved and as such ownership by the City is not necessary to effectuate the original purposes behind the purchase. Finally, aside from the adjacent public park, there are no other essential municipal uses to which the property could reasonably be used. If the Commission passes the above suggested motions to proceed with the sale to EFSM, the next step will be to draft a purchase and sales agreement for adoption by the Commission via a duly adopted ordinance. I have tentatively scheduled the first reading of the ordinance for September 19, 2011. 287 Page 7 of 7 ALTERNATIVES: · As determined by the City Commission. · Even though an appraisal is not required the Commission may consider doing so. FISCAL EFFECTS: If sold after adoption of an ordinance and closing process, staff recommends the proceeds from the sale be placed into the City’s general fund reserve and also the Commission consider assigning the funds to offset future capital improvements to Bogert Pool or the Swim Center or be earmarked for a new police and/or municipal court facility. Attachments: 1) Chapter 2.05, Bozeman Municipal Code; 2) Saving the T.B. Story Mansion: A Historic Plan for Purchase, Permanent Protection, Restoration, and Public Use; 3) Minutes from March 31, 2003 Commission meeting regarding purchasing the property; 4) Request for Proposals for Purchase of the Story Mansion; and 5) Exergy’s July 18, 2011 proposal. Report compiled on: August 5, 2011 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328