Iron Horse loss expected

2008 revenues to exceed expenses, but debt service costly

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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

— 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."

- To reach Brandon Gee, call 871-4210

or e-mail bgee@steamboatpilot.com

Comments

Scott Wedel 6 years, 11 months ago

How long will Lanning and DuBord keep their jobs? The disconnect between them and the City Council seems complete. Hopefully, the City Council realizes that City Managers like City financed projects because it adds to their experience and resume and thus is critical in their career plans. What city wants to hire someone that merely efficiently managed city services when they can hire someone that oversaw constructing a rec center, major city financed public housing, creating a new building dept and so on. Only trouble is that they are using our tax dollars for their resume padding.

Instead of noting that maybe this Council does not want to spend endless city funds on a few affordable housing units, they relentlessly defend the decisions of the previous Council.

Spending $80,000 to investigate converting city owned open space into as many as 5 units is ridiculous. That is $16K per potential unit just to determine if it is feasible. By the time they are finished, it'd probably cost at least $100K per lot of converted open space just to then give them to an affordable housing group to start building. Such an obvious bad idea to convert open space to housing and spend a small fortune doing it.

The big mistake of the Iron Horse purchase is that big time real estate developer Cafritz already had the Iron Horse under contract witth he intent of using it to provide employee housing. So all the City would have had to do is call them and other local motels and apartments and say that the City wants to pay for 8 units for the entire winter for the next 20 years and basically bid it out. Probably would have cost around $35,000 per winter based upon what Iron Horse charged last year for monthly stays.

Thus, the purchase was so unnecessary. And not only that, it was done in secret and with Cafritz changing from buyer to seller, there was no compelling reason to keep it secret (such as the seller's personal financial/business details becoming public or to not concern current occupants) other than to have no public debate for another City originated bad idea.

I expect this City Council to overreach and make some bad decisions, but so far they are much better than the last council.

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Gadfly 6 years, 11 months ago

Excellent points, Scott. There isn't enough lipstick in the world to make the Iron Horse deal look like anything but the pig it is. The real crime is that these annual losses at the IH are to be covered out of the Community Housing Fund, which should be going to the Housing Authority to carry out its mission. As to the Bear River parcel, it already has a detailed plan for being converted into park and recreation space, which is very much needed on that end of town. I applaud the new Council for taking its job so seriously so quickly.

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snowysteamboat 6 years, 11 months ago

Just a clarification for Scott. 5 or 6 acres, not units.

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thecondoguy1 6 years, 11 months ago

yes sir Scott, terrific thesis, I like the lipstick analogy as well, $200k divided by the 8 equals 25k, we could have added to these employees wages, I know this is simplistic thinking but, you can't tell me that wouldn't attract workers........... affordable housing= political boondogle.

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elphaba 6 years, 11 months ago

Maybe it should be renamed the Trojan Horse Inn as more and more things done by this last Council come crawling out to harm our City.

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STEMBOATwannabe 6 years, 11 months ago

How many units are being utilized as city housing in the Iron Horse?

How many bus routes are short drivers?

Not enough money for bus drivers, but the city can afford to keep a white elephant like the Iron Horse??

I don't get it? Something is wrong with this picture?

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housepoor 6 years, 11 months ago

They should have put the employee housing at the other white elephant that has been swept under the rug....the terminal building at Bob Adams field!!!!! Still can't figure out how everyone involved got away with that fiasco:..

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WZ4EVER 6 years, 11 months ago

After reading about how we're stuck with the debt etc., I was wondering about how that is legal under TABOR? Perhaps someone who follows these posts and is smarter about this than me can answer that - how can the City Council strap us to a debt that we can't get out of short of default yet avoid a public vote? Can that possiby be legal under TABOR?

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Steve Lewis 6 years, 11 months ago

I like the Iron Horse purchase. Are any of the above posters in favor of affordable housing? Doesn't seem like anyone is roasting the bargain $200 per sqft cost of the Iron Horse. It was $78K per unit right? The City, on my behalf and yours, is also expected to meet other goals than profit, such as attracting employees to provide your and my services. Safeway, Ski Corp, import seasonal workers from overseas. Why should the City not have the ability to innovate as well? Even Quinn said we could "flip it" for a profit, now he calls it a crummy deal? Scott, its not possible that rent over 20 years will be anywhere near what someone paid last year - unless they own the building, as we now do. Condo rents are jumping up this season 15-20% over last year. This should be fun....
-Steve Lewis

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Matthew Stoddard 6 years, 10 months ago

Hey Sb- if we so much better, why can't workers afford to live here? Ohhhhh, that's right: you can't even say you live here because you can't prove it, right?

So you don't even know what the worker shortage is like...except reading about it. As I've already told you thru my personal experiences that negate all your links when it came to my military service, and how it actually works in the military.

I know you feel more comfortable reading about life moreso than actually participating in it, so I don't expect you to prove to others that your way works more than just in theory. Try living it and tell us what you think.

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agentofchange 6 years, 10 months ago

former, I just saw Rob Dick this afternoon in Safeway. Yes, he still is here.

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