This is a long and painful story so I am going to do my best to summarize the situation. 

The city is being mean to me.  What should I do?

Here is the list of ideas I came up with:

1. City wants to demolish the building and they know they can use eminent domain if they need to. Up to this point I have kept all contracts with tenants short as an incentive for the city to buy... Should I write all new contracts with residents at 24 months and negotiate all contracts with business at 99 years? Theory being the city will be required to relocate and this will add tens of thousands to their cost.

2. City is marketing their lot to developers and again they will use eminent domain to take my building if they find a buyer... I could "list" my structure for $2 million (it would never ever ever ever appraise for that) to chase off any prospects the city might have in mind?

3. Do nothing and hopefully avoid adding fuel to the flame

4. Make the building an eyesore because it really will not negatively effect my rents but it will effect the appeal of downtown.

5. Use the building as a billboard.... Use eye sore marketing tactics 

(thats me and my work van... You might be surprised but its actually gotten me really good leads and listings...  Yes, that is real duct tape. Legally I could build a billboard using duct tape for the text and yes it would tick off the city.)

A slightly longer version of the story...  It will help put the above summery into context

The city wants to demolish the entire block of a building that I own... I picked the building up right ($32,500 at auction) a couple of years ago and took it from a money pit and made it into a money maker (net income $2,300 a month with room to add another $400 +).

The city bought the neighboring building for $165,000 and put $79,000 into demolishing it unfortunately the demolition created a lot of potential liability that would be my responsibility. I did not like this and I asked the council to make a plan and put $10,000 into escrow in case this potential liability became reality. They voted "no" which forced me to drop a rehab I had taking that project from an estimated $10,000 money maker to a small loss but this allowed me to have my contingency fund.

Video of the demo...  Its kinda artistic but not very good and not really informative.

The city also has low interest funds & grants to address commercial structures so I asked for funds to address my structure once demolition of the adjoined structure was complete to which they voted "no".

I couldn't understand why they were being so difficult to work with till I had an... emotional conversation with the mayor at which time he said the city might be interested in buying my structure. Im thinking they just spent $165,000 on a building that should have been condemned and I have a money maker so I should walk away with a nice paycheck.

They asked me to keep as many units vacant as possible and asked that I keep all leases short as they want the building empty. A few months go by the demo happens on the neighboring structure... the contractor puts the upper arm of his backhoe through the second floor of my building creating a 4 ft by 2ft hole with debris crushing a baby bed...

Baby was not in bed at the time and the contractor wants to fix the hole... He is part of the good ol boys club in this small town so I am now seen as a villain because I want an insurance claim (and I got an insurance claim....  not going to lie, it worked out for me.)

Anyway, Im losing money ($1,125) due to vacancy Im holding because the city wants an empty building, they push me into a position to sell another project which costs $10,000 in opportunity costs, they villainize me and then I get the offer... "City to buy the building for no less than $20,000 and no more than $50,000" "two independent appraisals to be done with the seller to pay for one ($1,500ish) and the city to pay for the second"

If the appraisals come back higher than $50k we could go into negotiations.

What do I do with these people? They are being way to aggressive and they are using dirty tactics (voting "no" to everything I ask for then they sent the sheriff to my house because a tenant had put a couch by my buildings dumpster... Half a block away there is a house with 5ft tall grass, the horder that lives there has "stuff" overflowing from the porch onto the yard AND THEY SEND THE SHERIFF TO MY HOME BECAUSE OF A COUCH????)

photos of the trash right down the street

Anyway, I countered the city with terms they countered with a slightly worse contract than the first. My question is "what do I do?" I have really tried to work with these folks but everytime I give them a carrot they swing a stick at me... Is it time for me to change tactics and swing a stick back at them? Should I sell at a huge loss? Should I dig in and cash flow the property?  What would you do?  What should I do?