Steamboat Springs City Councilman Jon Quinn called the Iron Horse Inn a "money pit" Tuesday night as council members discussed what to do with the facility purchased in 2007 and operating at a significant annual loss.
Thursday, August 20, 2009
Steamboat Springs Jon Quinn said at Tuesday's Steamboat Springs City Council meeting that the Iron Horse Inn was one of two issues that spurred him to run for election and put him in his seat on the council.
Two years later, the city's purchase of the inn is a persistent headache. The property is projected to lose $450,000 to $500,000 this year. On Tuesday, council members unanimously directed the city to negotiate a contract with New West Inns - owners and operators of the Comfort Inn in Steamboat - to manage the Iron Horse Inn as a nightly rental facility. The arrangement is expected to cut the inn's annual loss to $175,000.
"It's truly the money pit now," Quinn said.
A projection for city management of the inn showed a $150,000 loss, but Deputy City Manager Wendy DuBord recommended contracting with New West Inns.
"Quite frankly, it's not our core business," DuBord said.
A previous City Council purchased the Iron Horse Inn for about $4 million in 2007, in an effort to ensure the availability of affordable housing for city employees at a time when property values and housing costs were soaring. The city used certificates of participation to finance the purchase, an additional $1 million originally planned for renovations and issuance costs of $235,000.
The planned purchase was a hot-button campaign issue in the 2007 City Council election that saw all incumbents defeated and five new members join the council. After the election, the new council hoped to divest itself of the property but discovered that such a move would not be wise. Because of what is essentially a prepayment penalty, the $6.5 million needed to immediately pay off the certificates was significantly higher than the $5.3 million borrowed for the purchase.
Instead, City Council decided to save the $1 million originally intended for renovations. The inn's previous manager and staff ran the inn and the city nearly broke even through its first ski season. In 2008, the city contracted with Resort Group to manage the property as work force housing and established a committee to explore redevelopment opportunities.
This past winter, a bedbug problem resurfaced at the Iron Horse Inn. Mountain Resorts Realty, a division of Resort Group, told the city it wanted out of its contract to manage the facility because of the bedbug problem and began moving its employees out in February. Seasonal city employees also have since left the Iron Horse Inn, which is "virtually vacant" as of two weeks ago, according to a city staff report.
"We just don't have any tenants," DuBord said.
City Council President Loui Antonucci said allowing New West Inns to operate the Iron Horse as a nightly rental facility allows the city to offset the costs of owning, operating and paying the debt on the facility. This year's debt service on the Iron Horse Inn is $339,103, according to the city's 2009 adopted budget. Annual payments on the inn continue through 2032 and are as high as $480,300 in some years.
"We obviously would like to defray some of those costs," Antonucci said.
Quinn said he is sour on the idea of a city-owned hotel eating into the profits of private businesspeople.
"It's definitely troubling," he said. "It was purchased for affordable housing and now we're directly competing with private enterprise."
Quinn said he'd like the city to divest itself of the property as soon as possible. Steamboat resident Bill Jameson asked at Tuesday's meeting why the city doesn't raze the inn and build something else. Both options are problematic because of the way the city's purchase of the inn was structured. The certificate of participation holders, not the city, technically own the inn until it is paid off. The Steamboat Springs Building Corp. was created as an intermediary between the city and the certificate of participation holders and the board of that entity would have to sign off on the city's plans for the property.
Antonucci said redevelopment remains the long-term goal and that he expects the Steamboat Springs Building Corp. would sign off on such a redevelopment. Redevelopment is at least three years away, though, Antonucci said. A committee of city employees, local residents and council members exploring redevelopment options next meets in September.
"Everything is still up in the air," Antonucci said.
Antonucci said the property on the Yampa River and Yampa River Core Trail in the 300 block of South Lincoln Avenue is underutilized but that it is challenging to figure out how to feasibly create a plan for the site that accomplishes the original goal of providing affordable housing.