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#1 Consideration of Council Policy Statement #85 on purchasing property NEIGHBORHOOD SERVICES MEMORANDUM November 12, 2010 TO: City Council FROM: Jennifer Petruzzello, Neighborhood Services Director SUBJECT: Council Policy Statement #85 – Purchasing Property Summary The City of Janesville has undertaken an increased effort to acquire blighted properties in the downtown and older residential neighborhoods as part of a Neighborhood and Downtown Blight Elimination Program. It is beneficial to establish a Council policy for this program to facilitate the purchase of these properties in a manner that is efficient and maximizes the City’s ability to negotiate a fair purchase price for these properties. Staff Recommendation Staff is recommending that the City Council consider a policy which establishes a two tiered approach to the process of acquiring properties. For properties that will not exceed a purchase price of $40,000 for a single-family home or $60,000 for a multi-family home, staff will be authorized to consider properties that meet the goals of the Neighborhood and Downtown Blight Elimination Program and make an offer to purchase contingent upon: an appraisal documenting that the purchase price not exceed the appraised value (not required if anticipated to be less than $25,000), review and approval of the Janesville Plan Commission in open session, and review and approval of the Common Council in open session. For properties that will or may exceed a purchase price of $40,000 for a single- family home or $60,000 for a multi-family home, staff will present a preliminary review to the Common Council in Closed session prior to making an offer to purchase. The Common Council would then direct the staff on how to proceed on the potential purchase of property. If authorized by the Council, offers to purchase would include the same contingencies as above. If an accepted offer is reached, the item will be forwarded to the Janesville Plan Commission for their review and approval in open session, and to the Common Council for their final approval or denial of the purchase of property. In considering whether the potential property meets the goals of the Neighborhood and Downtown Blight Elimination Program, staff will consider the following: 1) The impact of the project upon the community and neighborhood; 2) The current condition, assessed value, and fair market value of the property and improvements; 1 3) The relationship to the City of Janesville Comprehensive Plan, the Look West, and Old Fourth Ward Neighborhood Revitalization Plan, and the Downtown Vision and Strategy Plan; 4) The anticipated costs of purchasing the property; 5) The options for re-use of the property; 6) The anticipated costs of preparing the land for redevelopment purposes; 7) The identification of relocation needs; and Additional consideration may be given to vacant and/or foreclosed properties that fall within the guidelines of the Neighborhood Stabilization Program. These considerations include property that is located within census tracts 3, 4, 6 or 10. (Including the Historic Fourth Ward and Look West Neighborhoods, the area directly east and south of the General Motors Plant, and the area to the north of the downtown; property located within one of two redevelopment sites as th identified in the City of Janesville’s Look West and Old 4 Ward Neighborhood Revitalization Plan; property located along collector, major arterial streets, or minor arterial streets; property located near schools or parks; property identified th as poor or fair condition on the 4 Ward and Look West Housing Condition Report (or of similar condition for census tracts 6 & 10. City Manager Recommendation The City Manager recommends approval. Suggested Motion I move to approve City Council Policy Statement #85 establishing a procedure for purchasing property funded under the Neighborhood and Downtown Blight Elimination Program. Background The elimination of blighted properties within the downtown and older residential neighborhoods has been identified as a priority through recent planning efforts, including the Janesville Comprehensive Plan, the Downtown Vision and Strategy Plan, the Look West and Old Fourth Ward Neighborhood Revitalization Plan, and the 2010-2014 Consolidated Planning Process. The City Council has provided funding for the acquisition and demolition of blighted properties through the 2009 note issue ($500,000) and 2010 note issue ($200,000). Additional funding is anticipated to be considered as part of the 2011 note issue as well. To date, seven (7) residential properties and seven (7) vacant lots have been purchased under this program and funding source. Properties acquired under this funding source included: 321 E. Court St., ½ of 1110 Hamilton Street, seven (7) lots in the Hickory Ridge Subdivision, 1332 Hawthorne Avenue, 404-406 2 Johnson St., 176 Lincoln, 903 McKinley, and 907 McKinley Street. The average purchase price for the residential properties is $19,261, with a range from $5,000 to $30,000. The current acquisition process involves staffpresenting a preliminary review to the Common Council in closed session prior to making an offer to purchase. The Common Council directs staff on how to proceed on the potential purchase of property. If authorized by the Council, offers to purchase include contingencies related to appraisal, Plan Commission and City Council approval. If negotiation is successful, the item is forwarded to the Janesville Plan Commission for their review and approval in open session, and to the Common Council for their final approval or denial of the purchase of property. The current process results in a range from 18-29 days between when staff first views the property and when a conditional offer may be made. The length of time from initial viewing to successfully closing on a property averages 10 weeks. When a property acquisition is scheduled for review in Closed Session, the agenda listing must include the property address. Following the last two Council Closed Session meetings to discuss the potential purchase of property, an investor has made an offer on the property within 24-48 hours of the Council meeting. This resulted in a multiple offer situation, where the seller calls for final and best offers. In both instances, the seller selected the alternative offer. (Although, the City ultimately purchased the first property after the alternative buyer’s deal fell through.) While it cannot be stated with certainty that the City’s disclosure of property address and/or the additional time between viewing and Council approval resulted in the subsequent offer, the City’s ability to negotiate the lowest acceptable purchase price was hindered by the multiple offer process. Under this program, staff has focused our attention on housing that is blighted and unsafe and that may have a positive impact on the surrounding area if removed. Our recent experience indicates that many residential properties of this nature are being bought and used as rental properties with no improvements or minimal improvement being made to the properties. Janesville does not currently have a shortage of affordable housing (we are hearing of a 15% vacancy rate); although it is arguable that we are experiencing a shortage of quality affordable housing. This process would be similar to the acquisition process that Neighborhood Services uses to purchase property through the Neighborhood Stabilization Program. By allowing Neighborhood Services to begin preliminary negotiations on properties we would anticipate the greater likelihood of obtaining accepted offers at a lower cost. All acquisitions would still require approval by the Plan Commission and the City Council prior to closing. 3 Analysis Potential advantages to approving the proposed Council Policy Statement include:  Increased likelihood of acquiring blighted and/or substandard housing and properties by decreasing the time period for other purchasers to submit offers. The time period between viewing a property and making an offer would be reduced by a minimum of 2 weeks.  Increased likelihood of acquiring properties at a reduced purchase price by reducing the likelihood of encountering multiple offers.  All purchases over $25,000 would be supported by a property appraisal documenting that the purchase price does not exceed market value.  The suggested limit of $40,000 for a single family unit and $60,000 for a multi-family unit is greater than the current average and allows this policy to remain effective for a time period after housing values begin to grow.  More efficient program administration and quicker approval process. Program administration includes reduced time spent viewing and considering properties that we are unsuccessful in purchasing, reduced time spent preparing agenda items for properties that we are unsuccessful in purchasing, reduced agenda coordination and City Council review time. Potential disadvantages to approving the proposed Council Policy Statement include:  The City Council would forgo its opportunity to discuss further negotiating strategy on a property by property basis in closed session. However, eliminating the closed session does not commit the City Council to purchase a property at a staff negotiated price because the offer will be contingent upon Plan Commission and City Council Approval.  The Plan Commission may be asked to review a property for consistency with City plans in which the City Council is not interested in pursuing.  Increased likelihood of acquiring properties at a reduced purchase price by reducing the likelihood of encountering multiple offers. Attachments: Council Policy Statement #85 cc: Eric Levitt, City Manager Jay Winzenz, Assistant City Manager and Dir of Administrative Services 4 CITY OF JANESVILLE Policy No. 85 Page 1 of 3 CITY COUNCIL POLICY STATEMENT Date Issued / /10 General Subject: Administration Effective Date / /10 Special Subject: Neighborhood and Cancellation Date Downtown Blight Elimination Property Acquisitions Supersedes No. PURPOSE To establish a procedure for purchasing property funded under the Neighborhood and Downtown Blight Elimination Programs. STATEMENT OF POLICY The following procedure shall be utilized to evaluate and acquire properties for potential City purchase: 1.Neighborhood Services Department and/or other staff as designated by the City Manager shall identify properties within the downtown and older residential neighborhoods for potential purchase under the Neighborhood and Downtown Blight Elimination Programs. 2.Neighborhood Services Department or other staff shall evaluate properties against the following criteria: 1) the impact of the project upon the community and neighborhood; 2) the current condition, assessed value, and fair market value of the property and improvements; 3) the relationship to the City of Janesville Comprehensive Plan, the Look West, and Old Fourth Ward Neighborhood Revitalization Plan, and the Downtown Vision and Strategy Plan; 4) anticipated costs of purchasing the property; 5) options for the re-use of the property; 6) anticipated costs of preparing the land for redevelopment purposes; and 7) identification of relocation needs. 3.If Neighborhood Services Department and/or other designated staff determines that the offer to purchase a property will not exceed $40,000 for a single-family home or $60,000 for a multi-family home, staff may make an offer to purchase with the following contingencies: a. The completion of an appraisal documenting that the purchase price does not exceed the appraised value if the offer is in excess of $25,000; and b. Review and approval of the Janesville Plan Commission in open session; and c. Review and approval of the Common Council in open session. 4.If Neighborhood Services Department and/or other designated staff CITY OF JANESVILLE Policy No. 85 Page 2 of 3 CITY COUNCIL POLICY STATEMENT Date Issued / /10 General Subject: Administration Effective Date / /10 Special Subject: Neighborhood and Cancellation Date Downtown Blight Elimination Property Acquisitions Supersedes No. determines that the offer to purchase property will or might exceed $40,000 for a single-family home or $60,000 for a multi-family home, a preliminary review by the Common Council of the proposed purchase shall take place in closed session, pursuant to Section 19.85 (1)(e) of Wisconsin State Statutes. 5.The Common Council shall consider the staff’s report and evaluate: 1) the impact of the project upon the community and neighborhood; 2) the current condition, assessed value, and fair market value of the property and improvements; 3) the relationship to the City of Janesville Comprehensive Plan, the Look West, and Old Fourth Ward Neighborhood Revitalization Plan, and the Downtown Vision and Strategy Plan; 4) anticipated costs of purchasing the property; 5) options for re-use of the property; 6) anticipated costs of preparing the land for redevelopment purposes; and 7) identification of relocation needs. 6.The Common Council shall direct the staff on how to proceed on the potential purchase of a property. If authorized by the Common Council, staff will enter into negotiations for the purchase of the property in strict accord with the directions and negotiating terms, conditions, and parameters. 7.An offer to purchase shall include the following contingencies: a. The completion of an appraisal documenting that the purchase price does not exceed the appraised value if the offer is in excess of $25,000; and b. Review and approval of the Janesville Plan Commission in open session; and c. Review and approval of the Common Council in open session; and 8.If agreement is reached, the matter will be placed on a subsequent agenda for a Plan Commission meeting. The Plan Commission review of the project shall be in conformance with Section 62.23 (5) of Wisconsin State Statutes. It is the responsibility of the Plan Commission to evaluate the project for its conformance with the City’s Comprehensive Plan, other adopted plans, and appropriate use. CITY OF JANESVILLE Policy No. 85 Page 3 of 3 CITY COUNCIL POLICY STATEMENT Date Issued / /10 General Subject: Administration Effective Date / /10 Special Subject: Neighborhood and Cancellation Date Downtown Blight Elimination Property Acquisitions Supersedes No. 9.The final review and action by the Common Council of the proposed purchase of property shall take place in an open session. The Council will consider the proposed project, including the financial aspects of the decision, and the recommendation of the Plan Commission. By motion, the Council shall approve or disapprove the proposed purchase of property. 10.The Neighborhood Services Department and/or other designated staff shall implement the action authorized by the City Council.