By the numbers
Iron Horse Inn
2008 projected revenues: $475,000
2008 projected expenses: $301,898
2008 projected debt service: $368,000
2008 projected loss: $194,398
Steamboat Springs While the debate continues about whether the Iron Horse Inn was a wise purchase for the city, a recently released report shows the property - which already houses eight city employees - is projected to lose almost $200,000 in 2008.
Revenues at the inn - purchased to provide affordable rental housing for city employees and others - are expected to exceed expenses by $173,602 next year, but the debt service associated with the purchase is expected to be about $368,000 in 2008.
The city funded its purchase of the Iron Horse Inn by issuing certificates of participation in the amount of $5,285,000, with an average interest rate of 6.48 percent. That amount was to cover a $4.05 million purchase price, $1 million for renovations and $235,000 to pay the costs of issuing the certificates, a form of borrowing. The term of the financing is 25 years. The purchase closed Oct. 31.
Councilman Walter Magill requested the city's report at a recent Steamboat Springs City Council meeting. The purchase was an oft-criticized move of the previous City Council in debates leading up to this year's election. Councilman Jon Quinn, one of the winners in that election, said the report is further proof that the purchase was "a crummy deal to begin with."
The previous City Council approved the purchase unanimously, and city staff also has embraced it. The city intends to provide affordable rental housing primarily for city employees at the inn. City Manager Alan Lanning said affordable employee housing was "determined to be a compelling public interest" by the previous City Council.
"All affordable housing to some degree loses money," Lanning said. "That's why it's affordable."
Transportation Director George Krawzoff has said the housing available at the inn helped him recruit drivers for the short-staffed Steamboat Springs Transit bus service. While employee housing is the ultimate goal for the inn, the city is constrained this ski season because it must honor existing reservations.
"We have at least eight people living in there right now," Lanning said, "and we could probably do more, but we have to honor previous obligations."
The Iron Horse Inn financial report provided to council members last week notes that the city was able to purchase the inn for $200 per square foot, or two-thirds of market value. That cost includes renovations, which will upgrade the inn's two buildings and reduce the hotel's 52 rooms to 40 rental units.
That renovation likely will require asbestos abatement. An inspection prior to the purchase revealed that walls in the older of the two buildings contain asbestos. These walls currently are encapsulated by newer siding and do not pose a health risk, but could if they are involved in the renovations.
While some new council members oppose the inn's purchase, it would be a hard move to reverse. Backing out of the deal likely would destroy the city's bonding ability, and it would be difficult to sell the property in the near future since the financing is expected to last 25 years.
"I think it is what it is now, and we just have to deal with it," Quinn said. "The question is what do we do with it now that we got it."
Bear River funding pulled
In another move that questions the affordable housing strategy of the previous City Council, Councilwoman Cari Hermacinski asked at last week's City Council meeting that $80,000, which would have paid for a study examining affordable housing possibilities on a piece of city-owned land known as the Bear River Parcel, be removed from the city's 2008 budget. Council members agreed unanimously.
"We're caught between the new council and the old council right now," Lanning said.
Lanning said the study was part of the previous city council's "leave no stone unturned" approach to exploring affordable housing options on property the city already owns.
The Bear River Parcel is the site of a former "sewer lagoon" located on the Yampa River near the recently-completed Routt County Justice Center. The 18.5-acre parcel is zoned for open space. Only five or six of those acres would potentially be used for housing, according to city staff reports.
While the Iron Horse Inn is proposed to provide affordable rental housing, the city hoped to provide deed-restricted, for-sale housing at Bear River, also primarily aimed, but not restricted to, city employees. In asking that the study's funds be removed for further consideration, Hermacinski expressed a concern that the company picked to do a feasibility study is also a developer of affordable housing projects.
Deputy City Manager Wendy DuBord, however, said that was something the city asked for in its advertised request for a feasibility study.
"There is no conflict of interest when you propose it like that," said DuBord, who noted the scarcity of affordable housing developers. "Developing affordable housing is a very specialized kind of development."
DuBord said there was no contract in place for the feasibility study. With the funding removed, the whole proposal is in limbo.
"It's not time sensitive," DuBord said. "Until they want to bring it back, it's basically not an issue."
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