City to set hearing on $1 property sales

COMMON PRACTICE

This process is done all over and has been successful for cities to move properties they have had to acquire due to nuisance/neglect of property owners without further expense.”

Laura Liegois, FM City Manager

FORT MADISON – The Fort Madison City Council will be setting dates for public hearings Tuesday on the sale of two properties for a dollar each.
According to two separate resolutions on tap for Tuesday’s meeting, the city has no use for either property and is looking to divest itself of the properties to private individuals looking to develop them..
City staff cites Iowa Code 364.7 in the agenda items. That code outlines the processes for the sale of the property, specifically 364.7(subsection 3) which prohibits the city from gifting the property to anyone other than another governmental agency. However, there is no definitive language spelling out how a city would arrive at a selling price for personal and real property.
The two properties are located 1116 13th Street and 1131 16th Street. The first property including the land is being assessed at $22,020 and the second is assessed at $25,390.
Iowa Supreme Court opinions have frowned on cities selling properties under fair market value.
According to language on the Iowa League of Cities website: “Although there is no specific procedure in state law for arriving at the appropriate sales price for city real property, on a number of occasions the Iowa Supreme Court has ruled in cases involving allegations that a city sold property for less than its fair market value, which is at bottom an allegation that the city had gifted part of the value of the property to the buyer.”
The properties were acquired through the city’s nuisance mitigation programs under city code.
City Manager Laura Liegois said selling property for a dollar is common practice among Iowa communities to encourage development of property.
“Yes, we have two properties for a $1.00 each for sale. We are setting the public hearing for this, as we are required,” Liegois wrote in an email to Pen City Current. “The city will create a development agreement with the sale of the property, which will take place after the public hearing on December 2nd.
"The development agreement will include that the new owner will be required to demolish the current properties on the lots, which the city acquired through our nuisance program. This is a win for a city to have the buildings removed and new buildings built/put back on the property taxes and clean up areas of our community. Both properties are in poor condition and most likely have a negative value. 
This process is done all over and has been successful for cities to move properties they have had to acquire due to nuisance/neglect of property owners without further expense. The demolition cost alone would be more than we would get out of the lots. We will never be able to gain the cost of legal we spend on properties like this, let alone the expense of mowing and snow removal.”
Scott Liedinger, a real estate attorney for Lynch Dallas, the city's law firm, said there are no additional requirements the city needs to adhere to aside from the public hearing and not gifting any real property.
"Iowa 364.7 of the Iowa Code governs the disposal of municipally-owned real estate.  All it requires, under applicable circumstances, is that there be a public hearing and that the City not dispose of any real property by gift," Liedinger wrote in an email to Pen City Current.
"There is no public bidding requirement and no fixed process or procedure for determining whether disposal of real property is by gift.  In these cases the City is avoiding considerable demolition costs at taxpayer expense by selling these properties subject to conditions that dilapidated and dangerous structures on the properties be demolished or rehabilitated by the buyer, at the buyer’s expense, and the City has taken appropriate contractual safeguards to ensure that title to the properties will be returned to the City if the structures are not demolished or rehabilitated as agreed. "
The city is proposing to sell the 13th Street property to Ryan Mueller of West Point, and the second property if the resolution is approved and following the public hearing in December, would go to Bates Construction, LLC. If the resolutions are approved Tuesday night both public hearings will be set for Dec. 2, beginning at 5:30 p.m.
In an unrelated issue, the council has a second reading of eliminating parking on the entirety of 24th Street from Avenue A to Avenue L to extend a city recreational path all the way to Avenue L.