City gives timeline
Negotiations between the city, and Herro and Haas began in June 2010 when the city requested permission from Herro to conduct an appraisal on the property; the property was appraised at $300,000. This timeline was shared by the city at Tuesday's meeting.
The property owners suggested a $325,000 value if they established a bed-and-breakfast elsewhere in the city, adding value to the downtown area. They asked the city to provide an incentive grant for creating the downtown business.
After more correspondence with the city about considerations related to the appraisal, Haas wrote a letter to Mayor Jim Daley stating an appraisal for the property would be more than $425,000. Haas said he would take $425,000 for the property with the city trusting that he would give $75,000 of it back to the city in some way.
The property the parcel for $456,000 with a "gift of $106,000." The $106,000 gift was explained as an IRS writeoff requested by the property owners.
According to the city, the parties made an oral agreement for $350,000 for the property, with no contingencies. The city made an offer to purchase for that price pursuant to Common Council final approval. However, that offer expired.
Negotiations continued when Haas met with City Administrator Diane Gard to discuss the 16,000-square-foot parcel, now valuing it at $650,000. The property owners suggested the city should pay $350,000 for the parcel, with the remaining $300,000 being an IRS gift.
After this, the city begins preparations to bring the subject of property acquisition to the Plan Commission. Haas requested 30 days to consult with an attorney and CPA. During this time the city began preparing a second offer with addenda for potential IRS gift consideration.
The city received a letter that the property owners would accept $350,000 with gift potential, but also requested another appraisal from Dennis Russell of Lauenstein & Associates, with the city paying for the appraisal.
The city declined the gift proposal, stating the scenario needed to be addressed between the property owners and the IRS outside of city authority. The city offered to pay $1,250 toward another appraisal and eventually both parties agreed to split the appraisal. By late February, after more correspondence, Haas accepted an offer of $350,000, plus half the appraisal. The city prepared the offer by the end of March.
Haas contacted the city in May asking that the city present the $350,000 but add $20,000 for loss of rent, because the owners had asked current tenants to vacate the property earlier in negotiations. The city stated during this time there were subsequent demands and valuations at different times of $400,000 to $644,000.
The city contracted with Southern Wisconsin Appraisals after the property owners' objection to the original appraisal and the time that has passed since the previous appraisal. In September, Southern Wisconsin Appraisals valued the property at $250,000.
The owners asked that local Realtor John Spheeris meet with the city attorney to act as an intermediary. The city delivered information to Spheeris, including the recent appraisal. After this, the city received an appraisal from the property owners based on "nonexisting presumptions of value from Lauenstein & Associates that the property is valued at $515,000."
The assumption is based on the property owners indicating that the property could be rezoned from residential to mixed-use commercial, increasing the value to $515,000.
The city met with both property owners and said that the council's support of the $350,000 purchase price was no longer likely. The city offered to enter into a binding arbitration agreement to settle the purchase price. The property owners' attorney said they would accept entering into arbitration, with the stipulation that the arbiter is from outside Waukesha County.
December 2012-January 2013
An arbitration agreement was prepared, but the property owners responded with additional conditions, demands and counterproposals, according to the city, which it agreed to. The deadline to sign off on the arbitration passed on Jan. 15; the city extended the deadline to Jan. 16, which also passed with no response from the property owners.
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