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Purchase of 2106 Kniest StreetTHE CITY OF Dubuque DT T~ ~ All-AmericaCiry ~J ~~~ Masterpiece on the Mississippi 2007 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Purchase of Property at 2106 Kniest Street DATE: April 16, 2008 Housing and Community Development Department Director David Harris recommends City Council approval to purchase a residential dwelling for $81,000 located at 2106 Kniest Street owned by David and Rita Birch. This purchase is part of the acquisition program associated with the Bee Branch Creek Restoration Project. At its September 17, 2007 meeting, the Council approved the purchase of a home owned by David and Rita Birch, in the amount of the appraised value of $74,000. Subsequently, however, the City was contacted by an attorney representing the owner who informed us they had reconsidered their acceptance of the City's offer and wished to rescind it. City staff contacted the City Attorney, who advised that the Birches be allowed to withdraw their acceptance. David Birch is a City employee. That did not influence my recommendation. I concur with the recommendation and respectfully request Mayor and City Council approval. l ~z Mic ael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager David Harris, Housing and Community Development Department Director THE CITY OF DUB E Masterpiece on the Mississippi TO: Michael Van Milligen, City Manager Dubuque ~~~~~ 2007 FROM: David Harris, Housing and Community Development Department SUBJECT: Purchase of Property at 2106 Kniest Street DATE: 16 April 08 Introduction The purpose of this memorandum is to request the City Council's approval to purchase a residential dwelling located at 2106 Kniest Street, as part of the acquisition program associated with the Bee Branch Creek Restoration Project. Background The 2001 HDR "Drainage Basin Master Plan" identified approximately 70 homes to be purchased as part of the Bee Branch Creek Restoration Project. To date the City Council has approved a preliminary right of way design and the properties that will be impacted have been identified. The Fiscal Year 2007 CIP budget has allocated $2,615,668 for acquisitions. Discussion At its 17 September 07 meeting, the Council approved the purchase of a home owned by David and Rita Birch, in the amount of the appraised value of $74 000. David Birch is a City employee. Subsequently, however, we were contacted by an attorney representing the owner, who informed us they had reconsidered their acceptance of the City's offer and wished to rescind it. We contacted the City Attorney, who advised that the Birches be allowed to withdraw their acceptance. The Birches then commissioned a second appraisal, done at their expense, which set value at $81 000. We then submitted the two appraisals to Graham Land Acquisition, the firm we have used for the past three years, to perform the `review appraisal' function and compare appraisals for this property. Graham then approved the higher appraisal figure as representative of the market value of this property. For this reason, we are again asking the Council's consideration of purchase of this property, at the $81 000 acquisition price. Note: The value of the `comparable property' was established at $90 000. Under relocation law, the owner of a property acquired by the City is entitled to an amount up to the difference between the price paid for the acquired property and the value of the comparable property, as a `replacement housing payment.' The amount of this payment is limited to $22 500, excepting for extenuating circumstances. In the case of Mr and Mrs Birch, this meant that they were entitled to up to $16 000 ($90 000 less $74 000), as their replacement housing payment, toward the purchase of a home of their choice. However, as the price proposed to be paid for their home has increased to $81 000, the difference between that and the comparable property has been reduced an equal amount, by $7000. The Birches are now eligible for only a $9000 replacement housing payment. They have appealed this on the basis that the comparable property identified - by ECIA, our consultant for acquisition and relocation services -was not sufficiently comparable to their property. A letter from ECIA to the Birch's attorney is attached. Action Step The action requested of the City Council is to approve the attached resolution, authorizing purchase of property located at 2106 Kniest Street in the City of Dubuque, Iowa. cc: City Attorney Lindahl RESOLUTION NO. 137-08 A RESOLUTION APPROVING THE ACQUISITION OF REAL ESTATE LOCATED AT 2106 KNIEST STREET, IN THE CITY OF DUBUQUE WHEREAS, the City of Dubuque intends to acquire certain properties located in the area of the Bee Branch Creek Restoration Project for stormwater mitigation activities as recommended in the 2001 HDR "Drainage Basin Master Plan;" and WHEREAS, a purchase agreement has been finalized with the owner of the twenty-eighth property scheduled for acquisition. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the City of Dubuque hereby approves the acquisition of the following legally described property: Southeasterly 20 feet of the Southwesterly 97 feet of Lot 2, and the Northwesterly 10 feet of the Southwesterly 97 feet of Lot 3, in Frisch's Subdivision of Lot 3 of Kniest's Subdivision of Mineral Lot 314; Northwesterly 5 feet of the Northeasterly 50 feet of Lot 2, Frisch's Subdivision of Lot 2 of Kniest's Subdivision of Mineral Lot 314; Lot 1 of Frisch's Subdivision and the Northwesterly 5 feet of the Southwesterly 97 feet of Lot 2, in Frisch's Subdivision of Lot 1 and Lot 2 of Kniest's Subdivision of Mineral Lot 314, in the City of Dubuque, Iowa, according to the recorded plat thereof. At the cost of Eighty-one thousand dollars ($81,000). Section 2. That the City of Dubuque be and is hereby authorized to accept a Quit Claim deed from the owner, conveying the owner's interest to the City of Dubuque, Iowa for the herein described real estate. Section 3. That the City Clerk be and she is hereby authorized and directed to cause said Quit Claim Deed to be recorded in the office of the Dubuque County Recorder, together with certified copy of the Resolution. Section 4. That the City Clerk be and she is hereby directed to forward a copy of this Resolution to the Dubuque County Assessor and the Dubuque County Auditor. PASSED, APPROVED AND ADOPTED this 21st of April, 2008. Roy D. Buol, Mayor Attest: Jeanne Schneider, CMC, City Clerk EAST CENTRAL (NTERGGVERNMENTAL ASSOC(AT(GN A ~egi~na1 ~'~~~asr~s~ ~~ >~cal ~c~ed`s January 24, 2008 Mr. llavid L. Clemens CMCW Attorneys at law 2080 Southpark Court Dubuque, IA 52003 RE: David and Rita Birch Dear Mr. Clemens: This letter is in response to your letter of January 16, 2008 to Darwin Polk regarding the above referenced City of Dubuque acquisition project for the Bee Branch project. You attached letters that indicate the Birchs are agreeable to the second appraisal and offer of $81,000. However, you further indicate that the Birchs want the full $22,500 relocation benefit. There is not a simple decision that is made to provide the full benefit; rather there is a computation of the benefit amount that is calculated utilizing federal acquisition rules and guidance. As you are aware, the procedure for the acquisition included an appraisal and review appraisal. That amount was X81,000 and you've indicated that amount is agreeable. The second part of the acquisition process includes a possible provision of a relocation benefit. This benefit is determined by a search of homes currently for sale within the City of Dubuque. The most comparable home is determined and inspected. The information is provided to the City of Dubuque Housing and Community Development Department for concurrence. Inmost instances, the comparables are valued higher than the subject property to be acquired. The difference between the comparable property value and the property to be acquired by the City becomes the relocation benefit. The determination of the most comparable dwelling is made utilizing federal rules and guidance that are the standards used across the country. Comparable dwellings are based on a variety of factors, including not only the type of house (e.g. - 2-story, wood siding, garage, # of bedrooms, sq. footage, etc.) but also the neighborhood, distance to schools, shopping, churches, etc. It is quite common that an identical property cannot be found or is available. The federal rules makers recognized this and state that the replacement dwelling is to be "functionally equivalent to the displacement dwelling in Handbook 1378, Section 1-bb (49 CFR 24.2(d)). Ii further states: The term "functionally equivalent" means that it performs the sanie function, provides the same utility, and is capable of contributing to a comparable style of living. While a comparable replacement dwelling need not possess every feature of the displacement dwelling, the principal. features must be present. Generally, functional equivalency is an PHONE (563) 556-4166 IOWA ONLY (800) 942-4648 PAX (563) 556-0348 E-MAiL ecia©ecia.org 1NE8 SITE wwN~.ecia.org • flubvque Metropolitan Area Transportation Study • Eastern Iowa Regional Development Corporation • Eastern Iowa Regional Utility Services System • Eastern Iowa dousing Authority • ECUI Business Growth, inc. ° Suite 200 3999 Pennsylvania Avenue Dubuque, iA 52002 January 24, 2008 Mr. David L. Clemens Page 2 objective standard reflecting the range of purposes for which the various physical features of a dwelling maybe used. However, when determining whether a replacement dwelling is functionally equivalent to the displacement dwelling, the Agency may consider reasonable trade-offs for specific features when the replacement unit is "equal to or better than" the displacement dwelling. Examples of Trade-Offs. If the displacement dwelling contains a pantzy and a similar dwelling with a pantzy is not available, a replacement dwelling with ample kitchen cupboards maybe acceptable. Insulated and heated space in a garage might prove an adequate substitute for basement workshop space. A dining area may substitute for a separate dining room. Under some circumstances, attic space could substitute far basement space for storage purposes, and vice versa. Generally, a comparable replacement dwelling must contain approximately the same amount of space as the displacement dwelling. However, when the displacement dwelling is dilapidated, a smaller "decent, safe and sanitary" replacement dwelling (which by definition is "adequate to accommodate the displaced person") maybe determined to be functionally equivalent to the displacement dwelling." In the Birch acquisition prof ect, the most comparable dwelling was determined; the value of the dwelling with an adjustment for repairs was $90,000. Therefore, the relocation benefit is $9,000 ($90,000 comparable dwelling value less $81,000 purchase price of the Birch home). Please note that had the purchase price been $74,000, the relocation benefit would have been $16,000 (590,000 comparable dwelling value less $74,000 purchase price). In summary, we are following the federal rules and guidance in making the determination of the relocation benefit. The benefit is not an arbitrary figure that is subject to negotiation, but rather a figure that is calculated utilizing the federal methodology. As noted, the relocation benefit in the Birch project is $9,000 as explained above. I hope this information explains the process. I did enclose a brochure that was provided to the Birches that explains th.e process and provides examples as well. Thank you for your inquiry. Please feel free to contact Darwin or me if there is any further question. Sincerely, Mark Schneider Community Development Director cc: David Hams, City of Dubuque Encl.