City, partners eye $1.1M purchase of Sleepy Inn for COVID shelter, future housing

The Sleepy Inn and its 34 rooms are located on roughly .60 acres at the corner of West Broadway and Russell Street. The property would initially be used as a non-congregant shelter during the pandemic, then redeveloped as affordable housing.

The city of Missoula is working to purchase a fading West Broadway motel for use as a non-congregant shelter during the COVID-19 pandemic, then move to redevelop the property as affordable housing down the road.

The $1.1 million deal has the full support of Missoula County and the City-County Health Department, but must win approval from the Missoula Redevelopment Agency’s board of commissioners and the Missoula City Council.

“We need to make sure people who don’t have shelter are isolated and quarantined,” said Missoula Mayor John Engen. “We need a place for those folks to be safe and cared for, so we don’t have community spread, and they have the best chance of recovery.”

The Sleepy Inn and its 34 rooms are located on roughly .60 acres at the corner of West Broadway and Russell Street, a location that makes it prized for redevelopment. The property also lies within Missoula’s new opportunity zone and Urban Renewal District II.

Engen said the purchase would be made in full using tax increment from within the district. The property was already on the market, offering the city a chance to achieve several pressing goals, including isolated shelter during the pandemic and affordable housing down the road.

“The other moving part here is that, pre-COVID, we had been looking at opportunities for redevelopment, particularly for housing projects, and we identified this property as one of those properties that was ripe for redevelopment,” Engen said.

If approved by MRA’s board this week and the Missoula City Council next week, the purchase would close this month. The city would also acquire the right of way held by the state under the purchase agreement.

“We knew if we were able to aggregate these two properties, we’d have a good piece of land for redevelopment for truly affordable housing, most likely low-income housing,” Engen said. “Our intention is to purchase the property and operate it as a non-congregant shelter for as long as we need to during the pandemic, and then we could pivot and move into a redevelopment opportunity.”

The property’s immediate use as a non-congregant shelter may provide the greatest potential, at least in the short term, advocates believe. Like other cities across the country, Missoula has struggled to provide certain populations a place to quarantine, including the homeless, local refugees and others who live with family and have no other place to go.

City-County Health Officer Ellen Leahy said FEMA this week released a pre-approval process for such emergency shelters related to virus. The opportunity at the Sleepy Inn meets those guidelines, meaning FEMA will reimburse 75% of the operating costs.

That includes management, sanitation, utilities, security and other expenses.

“We have already in Missoula had the need to find individual shelter with individual bathrooms for over two dozen people,” said Leahy. “Having this opportunity at the Sleepy Inn emerge at the same time that we’ve been struggling with this problem, and the same week FEMA came out with its pre-approval guidance for non-congregant shelters – there’s some good serendipity there.”

While the property is located in an urban renewal district, which makes it suitable for tax increment financing, it also sits in the city’s only opportunity zone. The two combined could boost future plans for redevelopment, said MRA Director Ellen Buchanan.

The city believes it can recover the initial purchase costs by selling the property for redevelopment as long-term affordable housing at a future date. And while the property hasn’t been formally appraised, Buchanan said one commercial appraiser believes the city’s $1.1 million offer is well within fair market value based on similar sales.

“And we’d have a valuable piece of real estate sitting under that property,” said Buchanan. “It’s in the opportunity zone, which is one of the things that makes this real attractive. When you layer tax increment financing and opportunity zone possibilities together, it’s pretty powerful.”

The proposal has the support of Missoula County.

“From the county’s standpoint, we’re excited to be part of this short-term effort that will have long-term public health gains,” said Commissioner Josh Slotnick. “We look forward in taking part in the negotiations around operations and financing.”

The City-County Health Department already had stated a need for such shelter to quarantine those waiting for test results from the virus. Under FEMA guidelines and federal appropriations, most costs related to the shelter would be covered.

The city’s financial responsibility would be limited to the $1.1 million purchase and its share of closing costs, estimated at around $3,000. Those costs would likely be recovered when the property is redeveloped.

“There’s so many good reasons why people could just give up on what we’re trying to do there,” said Leahy. “We have our elected officials, the city and county, our local healthcare providers, volunteers and others working around the response trying to make this happen.”