Several members of the Missoula's Historic Preservation Commission vehemently defended themselves against allegations of bias from the city attorney on Thursday night with regard to a demolition permit application they are considering for the historic Missoula Mercantile building. 

The commission took no action, but had plenty of discussion, some heated, in a meeting that pushed well past three hours. The commission put off the vote on the Merc permit until May 5. 

"I am still in shock that somehow we've been found guilty without any due process whatsoever," said HPC member Steve Adler. "I am really upset that the city attorney took a complaint, did an investigation and essentially found us guilty of bias without ever speaking to us. The fact that the vast majority of evidence against us is Facebook 'likes,' the fact that the quote is from well over a year before this started, if this quote makes me biased I don't see how anybody, whether an elected official, an employee or a volunteer, could pass that standard of bias."

Adler and fellow commission members Cheryl Cote, Kate Kolwicz and chairman Mike Monsos were informed approximately five hours before the HPC's regularly scheduled meeting that city attorney Jim Nugent was informing the city's Development Service's staff that the four should recuse themselves because they had engaged in conduct that appeared impartial. Nugent said that behavior could give a Bozeman developer, HomeBase Montana, the legal grounds to appeal a potential denial of the demolition permit application. HomeBase is proposing to replace the Merc with a five-story hotel.

After Adler opened the meeting by saying he wanted to address the "elephant in the room," the commission voted to postpone their annual awards because nobody was in the mood to consider them. 

"Evidently sometime today the city attorney deemed four of us unbiased and unable to hear this issue in appropriate fashion," Adler said. "My question is, 'Is there any legal method to counter what just happened?' We were not informed of the investigation until the guilty verdict was handed down. I would like to clear the record."

Cote recused herself, but alternate Delia Hagen was present. The other three members who were accused of bias chose not to recuse themselves.

Kolwicz said she doesn't believe the information presented in the city's investigation is correct.

"They allege that I 'like' the 'Save the Merc' page on Facebook, that is true," she said. "I also like HomeBase's page, so I'm not sure I'm going to call that bias. Facebook is a great source of info and I'm trying to keep my finger on the pulse of what people are saying. I will not be recusing myself."

Monsos said that members of the HPC use Facebook to gather information.

"Facebook, good or bad, is one of the ways you stay in touch with what people are thinking," he said. "That's where a lot of us are getting information so we can make an impartial judgment. We've only been given one side so far and we've been given a very strong side."

***

HPC member Cathy Bickenheuser said she was "appalled" to see the city attorney's opinion.

"I don't feel he's holding the same standards to the city council and the mayor that we're being held to," she said. "We need time to make the decision and the ability to make the decision and I feel like we're being pushed."

Adler said that he was shocked to find out about the allegations of bias from reading the Missoulian online.

"Evidently city officials are free to go on TV and go into the newspaper with their assertions, and I was under the impression that we as a board are not free to do that," he said. "That doesn't feel right."

Leslie Schwab, the city's historic preservation officer, said that the city's staff recommends approval of the demolition permit application.

She cited several reasons, including financial evidence that indicates that the cost to renovate the Mercantile is too high to support market-based rents.

She said a development group called Clark Street Real Estate provided their pro forma detailing a design for a Whole Foods to occupy the building, but the renovation would have resulted in a net loss of $6 million, so the developer backed out.

She said that HomeBase found that a complete renovation of the building would have cost $20 million.

Schwab was asked why the city staff's opinion differed from the state historic preservation office, which recommended that the permit be denied.

She responded by saying that she had received a great deal of supplemental information in terms of costs of renovation that caused the city's staff to reach a decision that there was no economically reasonable way to make a rehab project work.

***

Kate Hampton and Pete Brown came from Helena to speak on behalf of the state historic preservation office.

They said that they recommended to the HPC that the application should be denied is based on the applicant's failure to meet one of the criteria they have to consider, which is that "denying the permit would prevent all reasonable economic use of the property."

Brown also said that HomeBase neglects to include significant cost savings associated with the Rehab Credits and New Market Tax Credits that the current owner was poised to take advantage of.

"Combined, these tax incentive programs would inject multi-millions into rehabilitating and preserving the Mercantile," Brown said.

JP Williamson, the owner of the Missoula Mercantile, came to speak as well. He is the founder and president of Octagon Partners, the Virginia-based investment firm that purchased the building in 2011. He told the HPC that his original intent was to rehab the building and he's come to the conclusion that it can't feasibly be done, as have other developers.

"My firm has done 11 historic and new market renovations over the past few years," he said. "There are 17 deals that I've financed and utilized historic tax credits. That was our plan, to use historic new market tax credits to rehab the building. I guarantee there isn't anything you can ask me that we didn't consider, if you're concerned that we didn't explore every possible avenue."

Williamson said that HomeBase, which is under contract to buy the building, isn't the first developer to come to the conclusion that renovating the Merc isn't economically workable.

"My hope was offering (the building) for sale would bring forth someone presenting an opportunity that I hadn't considered," he said. "Nobody has."

More than a dozen people urged the HPC to deny the permit or take until June 7 to make a decision.

***

Nancy Tyrell, who with her husband David redeveloped the old Poverello Center downtown into new apartments while saving the facade, compared the potential demolition of the Merc to ISIS terrorists destroying the ancient city of Palmyra in Syria.

Ross Keogh, of Preserve Historic Missoula, said that there are federal tax credits available that would make a rehab of the building reasonably economically feasible and still get market-based rents.

He suggested opening up the process to allow requests for proposals to see if anyone else could come up with a better alternative.

John Coffee, the owner of the Hammond Arcade building downtown, told the HPC that one of his tenants has seen business drop off dramatically since Macy's closed in 2010. He urged the HPC to approve the permit.

Andy Holloran of HomeBase said he hoped the commission would make a decision on Thursday night. Holloran appeared exasperated when he pointed out to the board that they hadn't asked a single question from Holloran's architectural team.

"You won't ask them one question," he said. "I'm amazed. We have met the criteria as set forth in your ordinance. All we can do is abide by the rules we have been given. That's what we have done. We have been transparent. We have given all our information, we don't have any more information. At the end of the day, we expect a vote tonight on whether our application is approved or denied."

Holloran called Keogh's assessment of how the financial numbers could be changed "one of the craziest things" he's ever seen.

"Let's get to the root of the issue here," Holloran continued. "The issue is the project doesn't work because there is no tenant and there is no financing. There is no allocation available. I'm not trying to be argumentative or confrontational, we have completed an application, we don't have any more information, and we respectfully ask you to vote on our application tonight."

Williamson said he was at the "peak of his frustration" in this process.

"If you think there is some other avenue that I haven't explored, I would love to hear it, but I haven't heard it," he said. "There's no way we're ever getting yes. I don't believe that's an option. If you already know your answer is no, why would you make me wait to hear it?"

Julia McCarthy-McLaverty said the HPC would not be bullied into voting before the June 7 deadline.

"The angry owner of the building has implied that if we don't vote tonight then we are violating our duties, but everything I've seen is the opposite," she said. "To vote would do an injustice to the entire historic preservation process."

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