BILLINGS — With a 10-1 vote Monday night, the Billings City Council gave the Mayor power to sign a buy/sell agreement, signaling the city's intent to purchase the Stillwater Building with eventual plans to build out the space for a law and justice center.
"This idea, this is a long-term investment. This is not us just kicking the can on another problem that another Council is going to have to deal with in 10 or 15 years," said Councilmember Kendra Shaw, who represents Ward 1.
Alaska-based WC Commercial LLC currently owns the building, skybridge and nearby parking garage located across North 26th street.
Once Mayor Bill Cole officially signs the document, the city will have 60 days to do its due diligence to inspect the building to find any problems that may want to make city staff or the Council reconsider their decision. Sept. 15 is the expected date for the city to close the deal.
The city negotiated a $17 million price for the building and its land. The build out was estimated to cost an additional $10 million, and may take between three to four years to complete. The build out price doesn't include the cost of furniture, fixtures and equipment.
A portion of the money to buy the building would come from $20 million in freed up general fund money. During the height of the COVID-19 pandemic, the city paid for a portion of its public safety services using federal COVID-19 relief dollars from the CARES Act and the American Rescue Plan Act, thus freeing up general fund money to spend on other things.
The Stillwater Building was originally constructed in 1960 and was formerly a federal courthouse. The building has five floors, a basement with parking and underground access for prisoner transport.
The idea for the purchase is to have a central location for all of Billings city services. The planning and community development department, zoning department, code enforcement department, building division,public works, municipal court and police department could all be located under the Stillwater Building roof in the next few years if the city agrees to purchase the property.
The city's departments are currently spread across three locations downtown. After a tour of the current City Hall, Councilmember Mike Boyett said everyone was too crammed for space.
"It's not (accessible to people with disabilities). When I broke my ankle, I struggled through this building. There's people in closets. There's people in the boiler room. Yes, there's other building in Billings, but lets have all of the kids play in one place. Lets have room for expansion," Boyett said.
City Administrator Chris Kukulski said the plan would be to build out the immediate need of a law and justice center first. Then the other departments could move in as the leases run out on their current spaces over the next two years
"We are leasing several different spaces throughout the downtown too. We're a renter today for several of our office departments and that's money that the taxpayers are paying out that they will no longer be paying out," Kukulski said.
The city would only occupy around two floors of the Stillwater Building and would have the option to lease out the remaining space. Kukulski said the goal would be to get state or federal law-related services located in the building.
"My interest is not to go out and compete per se and try to book retail or other operations in this building. It is to put other local government services or state services or federal services that compliment the local government services that we provide," Kukulski said.
The Yellowstone County government already occupies 7,000 square feet of office space on the third floor of the building. The county pays about $365,000 per year to lease the space from WC Commercial. The lease ends in 2025.
Kukulski mentioned that the Yellowstone County Board of Commissioners recently took a 2-1 vote to sign a buy/sell agreement to purchase the Miller Building at 301 N 29th St.
"They're one of our most likely tenants. If they determine that they are going to leave after 2025, well before then we'll know that answer," Kukulski said.
The need for more city government space was first identified after the completion of a facilities master plan in 2015. For the past 18 months, the city has been in negotiations surrounding the Stillwater Building. A price wasn't agreed on, so the negotiations turned to rely on appraisals.
Jessica Iverson, city building official and facilities manager, presented background on the appraisals. Elkhorn Appraisal valued the building at $22 million and NVC Appraisal valued it at $12 million, Iverson said. A review appraiser was then brought in to analyze the other appraisers methods. The review appraiser, Dave Thomas, valued the building at $13.5 million.
"What market value determination from the review appraiser is looking to find is based on a typical market buyer or investor. It doesn't take into account the value of the specific advantages that the city. The negotiation committee took that into account during the negotiations in determining the price with the seller and concluded that the building is of greater value to the city than the review appraisal would suggest, which is why a higher purchase price was offered to the seller," Iverson said.
With the $17 million price tag, city would purchase the building at a price of $85/square foot. Far less than the $375/square foot it was estimated to cost to construct a new building.
Councilmember Shaun Brown said he was concerned about the city paying more than the appraised value and didn't like the possibility of a majority of the building remaining vacant if the city couldn't find tenants.
"Is it just going to sit empty for years? I struggle with that, but I'm working very hard to support this as an opportunity that we would not have had otherwise, but it's still $4 million. So I'm struggling with that, but I will support it," Brown said.
Ward 4 representative, Councilmember Penny Ronning, was the lone vote against the approving the buy/sell agreement. Ronning said she was supportive of the move to the Stillwater Building, there was not enough input from the public on how the city should spend the money freed up thanks to the federal government.
"I don't think it's been good government the way this process has worked," Ronning said.
"Not one single ask to the public on how the public wants to use that money. Not one single presentation on what our options are to use that money. Could we build a fire station 8, where 40,000 members of the Billings Heights could actually be served with additional fire services? What else could we be using that money for in regard to public safety services where our crime is so high it's unbelievable. I do not disagree that we need extra City Hall space. I don't disagree that we need law and justice center space, I don't disagree with that at all, but I disagree with the fact that this is the only option we're even given and presented by our city administration for the use of these funds," Ronning added.