The Iron Horse Inn, shown here along Lincoln Avenue in Steamboat Springs on Thursday, recently was purchased by the city of Steamboat Springs to provide affordable housing to city employees.

Photo by Brian Ray

The Iron Horse Inn, shown here along Lincoln Avenue in Steamboat Springs on Thursday, recently was purchased by the city of Steamboat Springs to provide affordable housing to city employees.

Council mulls Iron Horse

New councilors face challenges

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— Steamboat Springs' planned $4.05 million purchase of the Iron Horse Inn was a controversial topic leading up to Election Day. And now that the deal has closed, the incoming City Council will be hard-pressed to reverse the transaction.

The Iron Horse Inn purchase received unanimous approval from the current City Council and has been embraced by city staff. The city intends to use it to provide affordable rental housing for city employees and others. However, the purchase was heavily criticized by City Council candidates in recent months. That criticism included the final taxpayer price tag of more than $10 million, when interest is included.

Scott Myller, who defeated City Council President Susan Dellinger on Tuesday, said he may have looked to back out of the purchase of the motel just outside of downtown.

"It's in direct competition with the private sector's ability to provide rental housing," Myller said. "It makes them throw up their arms and not even try if the city's going to subsidize it. : Now that it's closed, I guess we'll have to deal with it. I'm the type of person that once a decision is made, I'm ready to move on."

The city closed on the transaction Oct. 31.

Jon Quinn, who defeated Councilmember Karen Post on Tuesday, also disagrees with the purchase, but suggested the city might be able to back out prior to the 2008 budget taking effect in January. Because the Iron Horse Inn purchase is structured as a "lease purchase," City Attorney Tony Lettunich confirmed that it's subject to annual appropriations and could be canceled. But Lettunich said such a move would be foolish.

The city is using certificates of participation to fund the transaction and has established the Steamboat Springs Building Corp. as an intermediary between the city and the certificate of participation holders. Lettunich said if the city does not appropriate funds related to the inn's purchase, it would default on its payment to the Building Corp., which would in turn be unable to pay the holders of the certificates of participation, leading to a foreclosure on the property.

"If the city does that, it would be catastrophic for our bonding ability," Lettunich said. "The bond market would not think very highly of Steamboat Springs. We legally have the right to do that, but there would be grave consequences."

Quinn also raised the possibility of selling the Iron Horse Inn in the near future. He thinks the city has underestimated renovation costs and suggested not remodeling the inn and using it only in the short term while looking to sell it for a profit.

"It's something I would consider, at least in the next five years," Quinn said. "I think we can do better than that particular piece of property. It's possible that the city could actually make a dime on it. : If there's a way that it can help in the near run, fantastic, but maybe we don't put so much money in the remodel and look to flip it."

Lettunich, however, said a sale also would be problematic. It is the certificate of participation holders, not the city, that technically own the inn. That won't change until the certificates are paid off in 20 to 25 years.

Current council members and city staff say the Oct. 31 closing date was in no way influenced by the upcoming Election Day.

"It was completely unrelated. I can absolutely guarantee you there was no attention paid to the election," Lettunich said.

Dellinger agreed.

"The closing was all specific to the seller, as every closing is," she said. "It had nothing to do with the election."

Lettunich noted that before the purchase and sale agreement was assigned to the city, the original contract closing date was Sept. 6. Cafritz Interests of Washington, D.C. - purchasers of Ski Time Square and Thunderhead Lodge - had originally planned to purchase the inn and use it to satisfy its affordable housing requirements for the redevelopment of its base area properties.

Once the purchase and sale agreement were assigned to the city, Lettunich said the city chose the earliest possible closing date to keep the seller interested. Lettunich said Oct. 31 was chosen because it gave the city enough time to approve the purchase through city ordinances with 30 days following the passage of those ordinances.

Not all new City Council members oppose the Iron Horse Inn purchase. Walter Magill, who defeated Vince Arroyo for a District 3 seat, said he thought it was a good purchase presented poorly. Meg Bentley, who defeated former City Manager Paul Hughes for a District 2 seat, said she was "thrilled that it closed."

Even Quinn said he isn't prepared to make any decisions regarding the inn.

"It's something that's going to take some attention," he said. "I'd like to learn more about it before telling you I'm going to go left or right."

Cari Hermacinski, who defeated Councilmember Towny Anderson in the at-large race, said the purchase is on a list of things she plans to learn more about from city staff before forming an opinion.

City Manager Alan Lanning agreed with Lettunich that the deal would be hard to reverse, but said he will be happy to explain why city staff thinks it is a good move for the city.

"It's pretty hard to back it up at this point," Lanning said. "If they ask, we'll explain why we think it's a good deal, and if they disagree, then they disagree."

- To reach Brandon Gee, call 871-4210

or e-mail bgee@steamboatpilot.com

Comments

another_local 7 years, 1 month ago

The city could have given all employees making less than professional wages a raise sufficient to afford rents in town for a LOT less money than buying this property will cost.

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another_local 7 years, 1 month ago

Sell it. Take the hit now and be done with it. Use the $$ from the annual deficit this would have produced to give raises to lower income city employees so you can fill the empty jobs and those people can afford to rent.

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caitieberry 7 years, 1 month ago

With the City of Steamboat Springs requiring new businesses to provide employee housing units, I think that the City should be the first to act by providing employee housing for City employees.

The step to buy the Iron Horse Inn, however disputed, took a hard stance that the City doesn't just talk, but the City can also take action and stand up for the policies they put into place.

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Gadfly 7 years, 1 month ago

Don't believe it. Both the seller and the City closed on this white elephant before election day because they both knew it wouldn't go through otherwise. Every day that this building operates will take money from our community affordable housing fund to subsidize. The City is going to have 40 new employees to house every year for the next 25 years? No way. It won't be long before the City is competing with all the other motels and condo places to get warm bodies to fill those units. Way to go, old council. No, on second thought, just go.

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justathought 7 years, 1 month ago

I believe they have already stated they wouldn't let it sit empty, so the taxpayer will end up subsidizing housing for private businesses. I wonder if the council has made a deal with Ski Time Square and Thunderhead Lodge for the taxpayer to supply them with affordable housing. If this building was slated for affordable housing for service workers to begin with, wouldn't it have been more prudent for the city to allow them to purchase it and the city look elsewhere (or pay better wages)? Why take privately funded affordable housing to make it publicly funded affordable housing if the object is to create MORE affordable housing? There is something wrong with this picture, and to push it through 6 days before elections, hmmm.

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housepoor 7 years, 1 month ago

maybe they will over turn the dumping of the building dept? no one was complaining except the board.......

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nxoby36 7 years, 1 month ago

I can't wait . What's next ? McSteamboat , Steamboat Mart , Steamboat City Foods , Steamboat Council Reality , City Council Gas & Oil ? When are they going to buy 30 dump trucks to haul snow and put another group of local businessmen out of business . Yes Sir The Socialistic City State of Steamboat is a coming !

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jaunty 7 years, 1 month ago

Oh, Scott, quit whining. Why don't you just order a boatload of corrugated sheet metal so you can plaster it all over the Iron Horse Inn and "beautify" it so it meets your architectural standards?

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steamboatsconscience 7 years, 1 month ago

Make sure its rusty sheet metal Its the most beautifullest

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mountaingirl33 7 years, 1 month ago

Ok so we have a couple of major issues in this town-

  1. There are not enough people applying for jobs.

  2. Even if they did get the job- where exactly are they going to live??

If the private party's who rent out their property's continue to raise the prices to an "unreasonable" level, we will not be able to attract quality employees to our town to help work the abundant amount of seasonal positions available November thru April.

If the city or those opposed to this purchase are worried about keeping it occupied- they have not done their homework very well- there are many many people who will occupy these units-

Affordable housing does not exist in this town, let's get real! It is up to all of us as year round residents, business owners and the like to get together to address this "housing" issue- we are all effected by not being able to provide for the basic needs of people who come to experience Steamboat for the season. Or are you your selves going to scan tickets at the mountain, or drive guests to dinner? Like it or not we are a resort town- most of our revenue comes from the seasonal visitors to our town. If you don't like it- MOVE!!!

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bubba 7 years, 1 month ago

Does anyone else find it strange that the way the city structured this deal, they don't own the ironhorse until the debt is completely paid down? According to Lettunich, that means that the only way out of the deal is to default on an obligation? What were they thinking? Is this the result of Towny's closed door meetings???

And mountaingirl, I am sick of this 'we are a resort town, make housing affordable for people who choose to be lifties rather than get real jobs' attitude. Most cities try to attract good jobs, Aspen decided to go the other way and create housing for the workers, thus allowing a bad economic model to exist. Steamboat has decided that the best thing to do to prevent being the 'next aspen' is to copy their every move. Genius! Steamboat has an airport 20 minutes away, cell service, high speed internet and endless amenities to make it a very attractive place for businesses to move, but instead of trying to attract good jobs, or give their people a raise, the government buys a hotel. This way, 40 or so people get a deal on housing, while everyone else is still screwed, and employers don't have to raise their wages, because if they did, that would disqualify them from hitting the jackpot and getting a taxpayer subsidized housing unit.

There needs to be some solution to community housing in this town, but buying a hotel that operates at a loss and we can't get out of is not the solution. And quit whining about how this is a resort town and there is nothing we can do about it. Cities with worse airports and no amenities bring in good employers, and it has never occurred to people here to even try. In case anyone is still reading, copying Aspen will not prevent us from becoming Aspen. We are not a resort town, we are a city with a resort. The government needs to act like a city government, or we will continue to see the middle class disappear, and become a ghost city of vacation homes and people afraid to earn too much, lest they exceed the government subsidized housing cutoff, and be forced to leave.

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Steve Lewis 7 years, 1 month ago

The arguments about the Iron Horse being a financially poor decision all lose ground to this one: the market appreciated 30 to 35% this past year. The Iron Horse appreciation alone, over $1 mil a year, makes it a smart buy.

What argument is left is what Scott Myller said: that the city is in the same market as the developers.
-Steve Lewis

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bubba 7 years, 1 month ago

Steve, according to this article, the city does not own the ironhorse, they are renting to own, so the tax payers make interest payments for 25 years while subsidizing this thing operating at a loss. So, the only way (according to mr lettunich's statements in this article) that the city can realize any appreciation is if we subsidize it for 25 years. Now, really, you can't expect the market to increase at 30% per year over that time- when you factor in the interest and the operating subsidy, this thing will need to appreciate at an average of 8-10% over 25 years to break even, maybe more. Furthermore, studying any markets, stock markets, tulip bulbs, real estate, etc... making a purchase just after the market goes up 30% has never been a good investment. I am sure someone will chime in to say that this is a new economy, just like the stock market in early 2000, or 1929 for that matter, but the fact is, 30% isn't a realistic growth rate. Ever.

And, of course, the % increase you are referring to is based on residential (not apartment building) sales. The market value of apartment, retail and commercial buildings is a function of the rent that they collect, i.e. their operating income, so the eventual sale of this thing is going to be based on the operating income, which in this case is negative. Of course, after 25 years as a low income rental, I am sure it will be a tear-down anyway. I won't go into a discussion of possible land appreciation vs housing appreciation, but suffice it to say that if construction materials and labor keep going up the way they have recently, I don't see land values keeping pace with existing structure values over that time-frame. Possible, yes, but I doubt council really thought this thing through to that degree, as they don't really strike me as economists...

So unless you can say with some surety that this thing will appreciate at over 8% per year for 25 years, then this is probably a poor financial decision that we are now locked in, if this article is accurate in the fact that we have no way out of this for 20+ years without defaulting on our obligation, thus forfeiting any 'equity' we may have developed.

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stompk 7 years, 1 month ago

bubba said it.

Why in the heck are we financing this.

Sure $4 million would have been a bit of a hit to our budget,

but it would have been better than a slow $10 million bleeding of the tax paying public.

They couldn't have waited a few months, and put it on the ballot?

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mountaingirl33 7 years, 1 month ago

pt22-

I am in the rental business, I read the classified adds daily to see where people are going with their rental prices- When some one is advertising a "Walton Village Condominium" a one bedroom condo for $1,100 per month you don't think that is "unreasonable"

You must make more than $10 per hour- congrats!

Bubba- Last time I checked we are a resort town- unless that ski area is a mirage- Yes we have other things like the ranching community and Steamboat's western heritage that make Steamboat what it is. But that is not a sustainable revenue sorce. If a resort town is what we are, than we have to deal with the fact that there are things that come along with that- like having housing options for those we rely on to come work here for the season-

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mountaingirl33 7 years, 1 month ago

By the way anyone who thinks that housing does not have a direct affect on good, qualified employees- for year round jobs from coming here, I suggest you read the article about the problems this caused in the search for the Yampa Valley Housing Authority's new president- Applicants backed out when they found out the cost of housing here in our "non resort town" (according to bubba)

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ColoradoNative 7 years, 1 month ago

Anyone ever think to offer incentives to developers to build some apartment buildings?

Everyone talks about not being able to afford a home in steamboat but not everyone wants to own a home in Steamboat. Affordable rentals. Now there is a concept.

Imagine what 300 affordable apartments would do for steamboat!

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Scott Wedel 7 years, 1 month ago

City Attorney Lettunich and former council member Dellinger are either liars or incompetent. No intelligent person could neglect to notice that the closing date was days before the election. No intelligent person could ignore that the seller would want to close prior to an election in which a new city council could want to delay or kill the deal. But in their own words, our City Attorney and leader of the city council saw no such connection.

And then who in the world structures a deal so that you are the buyer, are committed to bonds to finance the purchase, but do not possession for 20-25 years??? What in the hell is that?

Rush through a purchase just before an election and then structure it so that no one can do anything about it for 20+ years is the height of incompetent arrogance.

And I've heard from someone with good insider connections that Sheraton has already leased a bunch of rooms for this winter's employee housing.

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bubba 7 years, 1 month ago

Mountain girl, I am well aware that there is a resort here. BUT we are a bigger city than aspen or vail or most other resort towns already. The city council focuses on forcing us to remain a resort town, rather than admitting that we are a city and behaving like one.

Resort towns build dormatories so that the resort can pay people peanuts and those peanut earning resort employees can have a place to live.

Cities bring in employers that can contribute to the economy and pay a living wage.

As long as people hold on to this 'we are a resort town and there is nothing you can do about it' routine, we will continue down the path that we are on, which is that of a city of second homes, with a class of plebes living in government funded housing to serve the second homeowners. Rent is only unreasonable if you can't earn enough to pay it in the same town. There are three ways to address that- spend taxpayer money subsidizing housing for just enough people to get by, increase the stock of rentals so that there is competition among landlords, or raise the wages in the town. City council has long been focused on the first, to the detriment of the third. A multi-prong approach with all three is probably the solution to keeping service workers here, but focusing on building an economy where service jobs are the only option for anyone hurts EVERYONE, and that is what your 'we are a resort town, deal with it' attitude promotes.

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mountaingirl33 7 years, 1 month ago

There are many larger employers in Steamboat that are truly struggling to find employees for the winter. Unfourtunately this is no longer just a seasonal problem.

Pay and housing are the two top reasons for the decline in applicants- employers know this.

Glad the Sheraton was able to find housing- their previous housing was lost with the change of ownership of Ski Time Square.

Maybe the city did not make the best deal in regard to The Iron Horse- but if they handle it right- they should see some profit.

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Steve Lewis 7 years, 1 month ago

Hi everyone. I'm with mountain girl, but don't have as much time as you guys. The Iron Horse Inn buy was GREAT! And Bubba you sure can type! - Bubba, The operational income of a property is no longer the measure of its worth in Steamboat. Ski Time Square would be the best example. A lot of this criticism has been according to a developers pro-forma, which doesn't care about the things a city is obligated to meet. There are other eggs in their basket you should consider. - Matt, I agree the buyer would want the sale closed by election. I read Susan and Tony's comments to answer the charge that it was THEIR doing. Either way I don't see the scandal. And why be so intent on beating up a gone council?Why don't you wait to see what the NEW COUNCIL wants to do? Yell at them when they support keeping the Iron Horse as a good idea. - Finally, the argument that high wages will solve everything on housing sounds like you don't have employees of your own. Look at the rentals available and you'll understand why the large employers are doing their own employee housing. Craig's economy is coming out of its epic slump. Let's have this conversation in January and review your arguments then. - I'm outa here for some biking down south. Check you next week. -Steve Lewis

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stompk 7 years, 1 month ago

Why can't anybody tell me why we would finance it in the first place instead of buying it outright.

I believe the Iron Horse will retain its value, being next to the river an all.

It's just that we will pay 2.5 times the actual amount of the original purchase, and won't actually own it for 20+ yrs.

If we purchased it outright, we would at least be able to liquidate it if we needed.

Now, we are trapped in another Big Bank money sucker of the public.

But there will always be those that back the big financial loan deals, cause they have something to profit from it. Guaranteed.

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bubba 7 years, 1 month ago

Stompk, financing things isn't necessarily a bad deal; even if I could afford the house I live in, I would still have a mortgage, because my mortgage rate isn't as high as the rate of return I might earn putting all that money elsewhere. That being said, the city didn't truly finance this thing, they are renting it, and if they don't miss a rent payment for 25 years, then they own it, which is probably the worst financing structure I have ever heard of.

Steve, you were the one who brought up the increase in property values in steamboat. The only reason operating income doesn't dictate valuation of a commercial property is because someone is planning on tearing it down, your example of ski time square is a great example. If the city owned the iron horse, then maybe it could be considered an investment, but we won't own it for more than 20 years. If we had issued a bond or found traditional financing, then we could sell it if it turns out to be a bad deal, and repay our debt, but as is, we have zero equity until it is 100% paid off.

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agentofchange 7 years, 1 month ago

GOOD BYE Anderson, Post and Dellinger!

GOOD BYE Anderson, Post and Dellinger!

GOOD BYE Anderson, Post and Dellinger!

This is another fine mess you've gotten us into.

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rodcarew 7 years, 1 month ago

I can't contribute anything to how it was financed, but I think that if we support affordable housing, then we need to get past looking at the purchase as a money making proposition. With land prices being what they are, all affordable housing from here on out will be a money loser and subject to subsidy. If it were a money maker, then somebody other than the city would be doing it. It all comes down to whether the community thinks such housing is important enough to subsidize. If we were to sell the IRon Horse 10 years down the road for a profit, then we've accomplished nothing in terms of affordable housing.

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bubba 7 years, 1 month ago

Rod, my point is that if the iron horse isn't working out, we can't sell it ten years down the road, because we don't own it. Sure, there should be affordable rental property in this town, and it is probably going to take an act of government to get that, but the financing structure of this is such that we don't own it unless we make payments for 25 years, and getting out of it requires defaulting on an obligation, putting the city's credit at risk for future endeavors.

This is a rent-to-own scenario. Makes you wonder if they paid extra for an extended warranty...

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rodcarew 7 years, 1 month ago

After reading some posts, I agree that it would've been cheaper to buy it outright rather than financing. I also agree with bubba that the multi prong approach is the best way to addressing the affordable housing problem (we'll never completely solve it). There is no silver bullet and no one right way for every person. I've attempted in the past to offer my insight into how other resort communities have successfully addressed it (at the risk of being labeled socialist). I'm not here to say it's the best way or the only way, just a way. Ultimately, we'll come up with a uniquely Steamboat approach that considers and blends all methods.

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