Opinion ID: 176682
Heading Depth: 3
Heading Rank: 4

Heading: The Lease and Sale of Community House to the BRM

Text: In June 2004, the City and CHI entered into a new contract, a Management Agreement, which terminated CHI's lease and the Operating Agreement and transferred to the City all assets of Community House. The parties agreed that the City would pay all management costs from March 2, 2004 until the programs are transferred to other entities, manage Community House until a long-term plan could be developed, and take over responsibility on the FHLB loan. Undaunted, the City began exploring its options for such a plan in early 2005, when it published a Request for Interest/Request for Proposal (RFI/RFP). The RFI/RFP sought proposals from any party interested in direct management or ownership of three facilities and programs: Community House, the soup kitchen run out of Baltes Community Café, and MelloDee Thornton Childcare Center. Phase 1 proposals were due March 7, 2005. Responding parties were required to explain their interest, describe the team that would implement the plan, and discuss funding and other resources necessary to transition the services and provide them on an ongoing basis. A short list of organizations would then be invited to submit Phase 2 proposals, which were to contain timetables, funding sources, proposed budgets, and a detailed staff and management plan. The City received Phase 1 proposals from several organizations, including the BRM, Giraffe Laugh Day Care, Supportive Housing and Innovative Partnerships, Inc. (SHIP), and El Ada, Inc. On February 25, 2005, CHI submitted a very short proposal stating that Boise City ... must be [an] ongoing funding partner[] beyond the distribution of federal grant money, but it did not actually contain any funding information. CHI submitted a more complete proposal on April 17, 2005, six weeks after the Phase 1 deadline. In this document, CHI proposed to operate the Community House facility as it was originally envisioned with some alterations. The BRM proposed to renovate Community House into a shelter for single men, who were at the time housed at the BRM's facility on Front Street. If the City accepted, the proposal would require the City to negotiate exclusively with the BRM. Apparently concerned with the BRM's men-only policy and its religious services, Chatterton, the Director of City Planning and Development Services, asked for more information on these issues. In a May 11, 2005 letter, he requested clarification on how the BRM's policies would affect the emergency shelter services that the BRM proposed to operate at the facility. He asked for statistical and other information on the BRM's women's shelter. Chatterton also informed the BRM that the City could not negotiate exclusively with the BRM for the purchase of the facility at that time because a public auction was required by state statute. In response to Chatterton's letter, the BRM assured the City that the shelter was available to anybody, regardless of their religious affiliation. The BRM also explained why its male guests slept in the Front Street shelter, while women and children slept at the City Light shelter: The homeless population is [a] difficult population to serve under any circumstance. The problems are exacerbated in a mixed gender shelter environment. Further, it is not always appropriate to have families, particularly families with young or vulnerable children, to sleep in the same facility as other members of the homeless population. We believe that our separate shelter facilities for men and women is one of the reasons why we have fewer police calls at our facilities than Community House. Defendant Chatterton called the Boise City Police, verified that the Front Street shelter had nearly 60% fewer police calls than Community House, and passed this information on to the City Council. On May 31, 2005, the City informed the BRM that it could not accept its proposal at that time. Because the proposal contemplated a sale of Community House, the City described the steps it would have to take if it decided to sell the property and stated that the City Council would soon be voting on a resolution to move forward pursuant to those requirements. In compliance with Idaho law, the City Council passed Ordinance 6402 on June 29, 2005, which represented a superseding policy approach to this issue. The Ordinance did three things. First, the ordinance set forth the City's decision, as required by section 50-1401, to declare Community House surplus property that was underutilized by the City and no longer necessary for public purposes. The City gave the following reasons for its decision: (1) the City's core mission did not include providing emergency shelter services; (2) there was a shortage of emergency shelters in the Boise area, and use of Community House as an emergency shelter could meet the needs of the community; (3) a private entity trained to manage an emergency shelter would be better able to manage the facility as an emergency shelter; and (4) converting the property to a use that was within the core mission of the City would cost more than the City could pay. Second, as required by section 50-1402, the City set a minimum value for the property: $2.5 million. Third, the City placed a deed restriction on the property which reflected its continuing formal concern for the homeless, a restriction which required that the facility be used for ten years as a soup kitchen and shelter for the homeless. On July 12, 2005, the City amended the deed restriction by passing Ordinance 6404. Ordinance 6404 required that the property be used for ten years as a soup kitchen and as a shelter for a minimum of 66[] single, homeless[] men, ages[] 18 years or older. This Ordinance reiterated the City's intent to ensure the existence of a shelter for the homeless, saying, There is a shortage of structures designed as emergency shelters. Therefore, while the structure would be underutilized by the City, it could meet the needs of the community if it was surplused. Moreover, Ordinance 6404 required that the building be operated in a manner designed to protect the immediate neighborhood and the community as a whole from harm and from loitering. As required by sections 50-1402 and 50-1403, the City published a notice of sale, informing potential bidders that the auction would take place on July 15, 2005. Before the auction the BRM informed the City that it was not planning to bid but that it would consider purchasing the property later if the price and terms of purchase [are] acceptable. On behalf of CHI, then-President Sue Cobley made the only bid at the auction. CHI offered to buy the property for $2.5 million of its equitable ownership interest in Community House, including its fixtures and improvements, personal property, and accounts. Cobley alleged in an affidavit that auction officials accepted the Community House Inc. bid at the auction, but that in a July 26, 2005 meeting, the City Council rejected the bid, and refused to complete the transfer in accordance with the Ordinance requirements. Chatterton stated in a memorandum to the mayor and council members that CHI's bid was non-conforming to the auction requirements and recommended the Council find there were no responsive bids at the auction. Chatterton stated, CHI has not demonstrated that they have `equitable interest' in the Community House property sufficient to pay for the facility. Acting within its lawful authority under section 50-1403, the City decided to negotiate a lease, including a purchase option, with the BRM. In those negotiations, the BRM wanted the same $1 rent that CHI had had, while the City asked for market rate. The BRM initially asked for an option price of $1.8 million. The City and the BRM executed a lease on September 2, 2005. The initial lease term was less than a year, with nine renewal terms of one year each. At first the BRM would pay $1 per year in rent, which would escalate to market rent after five years. The option price was $2 million if exercised by March 31, 2007. After that date, the price increased to around $2.7 million. The City retained no power to exercise any management or control over the BRM or the facility. Section 5.2 of the lease required the BRM to use the facility as an emergency homeless shelter and a soup kitchen. Although these were the only two services the lease required, the BRM was authorized to use the building in other ways, such as general residential uses and programs for substance abuse recovery. Minutes of a BRM Board of Directors meeting show that by August 9, 2005, the BRM was still considering charging rent for SROs on the top floor. The City Council formally adopted Resolution 18765, which approved the lease to the BRM. The Resolution required that the BRM operate the facility on the terms generally set forth in Boise City Ordinance No. 6404, which contained the single-men-only restriction. The City closed Community House on September 6, 2005. The BRM reopened the facility in October and renamed it the River of Life Rescue Mission. The City repaid CHI's outstanding FHLB loan and, by doing so, obtained a release of liability on behalf of both the City of Boise and CHI. The BRM exercised its purchase option on January 9, 2007.