By Krystal Spring/Havre Daily Newsfirstname.lastname@example.org
The Montana Department of Transportation has given the city of Havre three options for disposing of the Heritage Center, which city officials say it can no longer afford to operate.
However, city officials say none of the three plans outlined in an Aug. 18 letter to Havre Mayor Bob Rice will work.
"I looked at all three options in the letter," Rice said Monday. "We're still negotiating, trying to find a viable solution for this building."
The city purchased the former post office and federal courthouse from the U.S. Postal Service in 1996 with $89,600 in funds from MDT's Community Transportation Enhancement Program and has since used other CTEP money to repair and renovate the building. Mick Johnson, administrator of MDT's district office in Great Falls, said the city will need to pay back the CTEP funds if it sells the building.
"We're trying to recover part of the investment that taxpayers have put into the building we estimate that at about $170,000 to $200,000," Johnson said today. "We don't want the Heritage Center to become an obstacle that puts the city of Havre into a financial hardship, but we're trying to protect taxpayer investment."
The city took over management of the Heritage Center on July 1, after the H. Earl Clack Foundation - which had leased the building since 1996 - relinquished management of the downtown landmark, saying it couldn't afford to continue to do so. The building houses the county's H. Earl Clack Museum and some business offices. The City Council voted June 21 to consider selling the building to a private purchaser.
Rice received a letter from CTEP engineer Mike Wherley on Aug. 18 after the state's CTEP committee met with officials of the Federal Highway Administration, which supplies the CTEP money, to discuss the future of the building. The letter outlined three options. The first said the property could be sold at "fair market value" through a public sale. If the building were sold, the proceeds would be split. An estimated 13 percent would be retained by the city, and 87 percent returned to CTEP - which would match the initial percentage of CTEP money used to buy the building in 1996.
Johnson said MDT plans to review Hill County's 2003 appraisal of the building - $320,000 - soon. Federal and state officials will also conduct a thorough evaluation of the building, so they can "get an idea of what it's really worth," he said.
The second alternative, an outright sale at less than fair market value, outlined an option to transfer the building to the hands of a private owner, with an agreement that a part of the building - like the museum - be maintained for public use or benefit for a period of time. The letter said the "discount" from fair market value would be determined "according to the amount of public benefit resulting from the sale." If the new owner failed to maintain the public use benefit agreed upon in the purchase contract, the ownership would revert back to the city of Havre.
"The museum is a public feature in the building that we'd like to see preserved," Johnson said. "We want to work with the city of Havre, recover the CTEP investment and help the museum."
The third option, a continued ownership by the city with lease or rental agreements, outlined a plan in which the city could seek another leaseholder to manage the property and still remain the building's owner. The Clack Foundation managed the building under similar conditions.
Johnson said the three options given in the letter set solid parameters for the city to work with when considering how to best dispose of the property.
"There may be another option or two out there, but I don't know if they're as feasible," he said. "We're trying to work with the city as best we can, and quickly."
City Council member Tom Farnham said Monday that the city is still weighing its options for selling the building.
"We're still waiting to hear from the big dogs" at MDT and FHWA, Farnham said. "The letter wasn't a definite answer."
For the past two months the council's Finance Committee has been reviewing bids from private entities to buy the building. The committee received written proposals from two prospective buyers. Jim Treperinas offered the city $1 for the building. He said he would make necessary roof repairs and other building improvements, so the building's office space would be more attractive to prospective renters.
Tom and Jamie Lambrecht have presented two options for the building. The Lambrechts' first option, a public-private partnership, outlines the couple's plan to pay the city $5,000 for the building, plus an additional payment equal to a 13 percent match for CTEP funds they would use to complete a planned roof project. It would also require a five-year graduated tax abatement on the building.
The Lambrechts' second option is a $20,000 cash purchase, relieving the city of "any and all obligations associated with the building."
Rice submitted a "letter of hardship" to MDT Sept. 7, outlining several reasons why the city needs to dispose of the Heritage Center - including the building's operating costs and needed repairs to the boiler system and roof. The letter stated that while the building only brings in $3,000 in revenue a month, the costs to operate the building are about $4,000 a month.
"This includes the bare minimum to operate the building. The current monthly costs for gas and electricity run on average of $2,300/month," the letter added. "This building is costing the city money that it does not have in its operating budget."
Dave Peterson, public works director, on Monday estimated the city's costs to run the building last month at $914:
Havre Laundry - $51 per month
Kone Elevator - $47 per month or $141 quarterly
Property insurance - $142 per month or $1,703 a year
Water - $90 per month
Cleaning supplies and tenant supplies - $60 to $80 per month
Building lockdown - $240 per month
The city paid NorthWestern Energy $264 last month for utility costs, far less than the $2,300 per month the city estimated. But Peterson said heating the building during the winter will likely cost more than $2,300.
Rice said that while the Heritage Center may have a positive account balance today, he doesn't anticipate it to continue as winter nears and the building's utility costs rise.
"We've never managed the building in the winter, so we really don't know what to anticipate," he said today. "All it will take to wipe out that account is one bad month and that's it. We can't rely on having a little money in that bank and living off that."
Lowell Swenson, the city's finance director, said the money the Heritage Center collects in revenue per month is put into its own account.
"We have a separate fund for the Heritage Center, just like we do for water and sewer," he said today. "Each fund has its own cash balance."
The cash balance in the Heritage Center fund was $3,700 at the end of August, he said.
Peterson said operational and building maintenance costs arise that can't be budgeted for month to month. A door at the center was vandalized over the weekend, which will need to be repaired at a cost to the city, he added.
In another development, the Clack Museum Board met Monday night to discuss the museum's future in the Heritage Center.
"We have some tough decisions to make," museum board chairman Ron VandenBoom said at Monday's meeting. "There's really no easy solution for any of this. We lose no matter what we decide."
Since July the museum has paid $1,200 per month to stay in the Heritage Center. The board is now considering several locations within Havre to move its facility. The board reviewed two offers - one from the Holiday Village Shopping Center and another from Jay Hammond for space at the old Big R Supply building. Both facilities would cost the museum an average of $1,450 per month for rent and utilities.
"Any amount of rent we pay here or somewhere else will take half or more of our entire budget," VandenBoom said. "We can't afford it."
The board also discussed closing or "mothballing" the museum for a few months, until a decision can be made regarding where the museum can relocate, if it chooses to leave the Heritage Center. No final decisions were made at Monday's meeting.
The board will discuss whether or not to pay the city rent for October at a special meeting Sept. 21 at 5 p.m. at the Heritage Center.
City Council member Emily Mayer Lossing, who also serves as the city-county historic preservation officer and Clack Museum manager, has planned a public meeting next week to gather community support for her idea to place a ballot initiative about the Heritage Center on the municipal election ballot in November 2005, leaving the fate of the historic building to voters. The meeting will be held Sept. 22 at 7 p.m.