A judge has ruled against the city of Hot Springs in its attempt to reclaim the old Carnegie Library property from developers Steve and Carla Simunek, who bought the library from the city in 2003.

Meanwhile, in the other major dispute involving the Simuneks and the city of Hot Springs, both sides have reached a tentative agreement on how much the Simuneks will be paid for developing a nine-hole addition to the city golf course, Steve Simunek said Wednesday.

On the library lawsuit, 7th Circuit Judge Jerome Eckrich ruled that the city had no basis for any of its claims against the Simuneks.

The city cited a state audit that said Mayor Carl Oberlitner had violated state law by imposing conditions on the library auction on the day of the sale.

But Eckrich disagreed, saying the mayor was responsible for carrying out the decisions of the council, which had authorized the sale.

Oberlitner and then-city attorney Mike Ortner had required the buyers - the Simuneks - to have an engineering plan to renovate the building within 180 days of the sale and to finish construction within two years.

Judge Eckrich noted that the city council approved the additional conditions four days after the sale.

Eckrich also rejected the city's contention that the Simuneks had failed to live up to the additional conditions. The judge ruled that the additional conditions were not included in the deed so were not binding.

Current city attorney Pat Ginsbach said he forwarded Eckrich's ruling to state Attorney General Larry Long, who had directed the city to file lawsuits over both the library and the golf-course deals after the state Department of Legislative Audit declared there were violations of state law in both deals.

Ginsbach said Long's office is leaving it up to the city council whether to appeal Eckrich's ruling.

Simunek said he expected the favorable ruling. "We did nothing wrong except bid on it (the library)," he said in a phone interview Wednesday. He said the additional restrictions were a good idea. But the renovation required pumping 46,000 pounds of concrete down through the library building's footings into huge voids in the bedrock. Engineers insisted on waiting six months to see if the building settled before going ahead with design work. The building was completed in 2006, one year after the two-year requirement, Simunek said.

The building had been appraised at $28,700 and was sold to the Simuneks at auction for $65,000.

Simunek replaced the crumbling back wall of the library building and built an addition. The building now houses offices.

Oberlitner said Wednesday he felt vindicated by the judge's ruling. "It's nice to see a court say what you did was not only legal but probably had the best interests of the community at heart."

Oberlitner said the renovated library building is on the tax rolls and is a good addition to the community.

"I think, based on what the council asked me to do, what I did and what it produced, I think the people are way ahead."

Both the library deal and the golf course addition, which involved the city swapping land with Simunek, blew up in controversy last year and intensified after the state audit. Some council members asked the mayor to resign, and a recall effort was launched against Oberlitner.

Oberlitner refused to resign and survived a recall election in June.

Ginsbach, who was not city attorney when the library and golf course deals were made, said negotiations are continuing on the golf-course deal. Any deal first must be approved by Long and then go to the council for approval, because Long is supervising the lawsuit, Ginsbach said.

But Simunek said Wednesday that he and city officials have tentatively agreed that he will be paid $625,000 for the golf course. Simunek said the original agreement with the city called for him to be paid $1.5 million for developing the back nine of the Southern Hills Municipal Golf Course.

Simunek had counter-sued, seeking the return of the golf course.

Simunek said he is willing to take substantially less money, but not because the golf course is worth less than $1.5 million.

"My wife and I have decided to take less because we want to get this behind us and get the growth of our community back," Simunek said.

Simunek said he didn't want to take the golf-course suit to court because if the city lost, it would hurt its ability to help finance a badly needed new hospital in Hot Springs.

"Economic growth is everything to a small community. If we can get a new hospital, we all gain," he said.

Contact Steve Miller at 394-8417 or steve.miller@rapidcityjournal.com

Curt Nettinga of the Hot Springs Star contributed to this report.