Iron Horse Inn renter Larry Haines talks Wednesday about his living arrangements at the city-owned property. Haines says he is happy the city provides the opportunity for transitional housing. He spoke at Tuesday's City Council meeting about the city's lease of Iron Horse to Boulder-based New West Inns.

Photo by Matt Stensland

Iron Horse Inn renter Larry Haines talks Wednesday about his living arrangements at the city-owned property. Haines says he is happy the city provides the opportunity for transitional housing. He spoke at Tuesday's City Council meeting about the city's lease of Iron Horse to Boulder-based New West Inns.

Iron Horse Inn faces new quandary

City's lease to hotel operator could force out tenants

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— As the city nears final approval of a lease agreement for the Iron Horse Inn, some say the former hotel is fulfilling its intended purpose of providing long-term affordable rentals and should not be operated as a nightly rental facility that would compete with local lodges.

On Tuesday, the Steamboat Springs City Council preliminarily approved a three-year lease with Boulder-based New West Inns, owners of the Comfort Inn in Steamboat, to manage the Iron Horse Inn. The move is expected to reduce the Iron Horse's annual losses to about $160,000 from what originally was projected to be as much as a $500,000 loss this year. The lease is subject to final approval at the Nov. 3 council meeting.

A previous City Council bought the inn in 2007 to provide affordable housing at a time when property values and housing costs were soaring. The inn nearly broke even through its first winter. A recession, a bedbug problem and several operational scenarios later, the inn was declared to be nearly vacant in August, when the council first unanimously directed that the city negotiate a lease with New West Inns.

In an effort to minimize losses until New West Inns' scheduled takeover of the Iron Horse in December, the city offered $600 monthly rentals. Twenty-eight of its 52 rooms now are occupied, and there is a waiting list for the "efficiency units" that include kitchenettes and are similar to small studio apartments.

In the opinion of Larry Haines, all this amounts to a completely different situation than existed in August when the inn was mostly empty.

"I just wanted City Council to be aware that that was not the case," said Haines, an Iron Horse resident who spoke at Tuesday's meeting and said the council should consider the fact that the Iron Horse is now fulfilling its originally intended purpose.

"In this case, the city has actually been successful in providing" affordable housing, he said.

Although it certainly has the feel of a former hotel room, Haines' home at the Iron Horse Inn also is similar to many modest rental units in Steamboat Springs. Three pairs of skis are in the corner, and a mountain bike leans against the wall near the table where his desktop computer sits. Personal furnishings are interspersed with those that came with the room.

Haines moved in August from Milner, where he was paying $800 a month for a studio apartment and commuting to Steamboat for work and classes at Colorado Mountain College.

"It was just tough to make ends meet," said Haines, who said his fellow tenants appreciate the convenience, affordability and flexibility the Iron Horse Inn offers. "In a transitional housing market, that's exactly what you're looking for. : They're working people, and there's definitely some families here. For families, it's really tough to find places."

One of Haines' jobs is at the Alpiner Lodge downtown. He said he brought the issue to the attention of that motel's management. General Manager Bea Westwater and Managing Partner Jon Wade also spoke at Tuesday's council meeting and said it would be unfair to compete against a city-owned facility.

"You filled a niche market. You filled a very, very, very needed source of living quarters in Steamboat," Westwater said. "I don't think it's really fair, as a property manager, to compete with the city."

City officials acknowledge that it is unfortunate to be competing with private businesses, but they said they don't want to be in the property management business and that New West Inns' proposal is the best option for minimizing losses. Facilities Manager Bob Robichaud said the city would have to increase its monthly rents to $750 and operate at 90 percent occupancy to match it.

"I think it's the best we can do," Councilman Steve Ivancie said about the lease.

Haines stressed that he understands the position the council is in and praised city officials for answering all of his questions and treating him well.

"I'm just hopeful New West thinks about letting us stay here through the winter," said Haines, noting that ski season is the toughest time to find housing in Steamboat. "We would really like to have the option to stay here at something comparable to $600 a month through the ski season."

Jesse Allison, a manager with New West Inns, said the company plans to keep some weekly and monthly rentals in its mix because "the outlook is not good" for nightly rentals this winter.

Allison could not say, however, how many or which long-term rentals would be left out of the nightly rental pool - aside from a room leased by LIFT-UP of Routt County.

And although he said rents would have to be increased during the ski season, he did not have exact figures.

"We're going to play it by ear," Allison said.

Comments

greenwash 4 years, 5 months ago

My employees have been using Iron horse all summer and its been great all the way around.We tried to make a deal with Alpiner first but to no avail.Iron Horse is a Great piece of real estate....location,location,location.The naysayers are just out of touch with reality.

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Paul Hughes 4 years, 5 months ago

While providing affordable workforce housing is an admirable goal, the City's massive annual loss at the Iron Horse Inn is not the right way to do it. Apparently the new management deal will reduce the annual loss from $500,000 to "just" $160,000. That money has come -- and will continue to come -- from cutting City services and furloughing employees. There is nothing in the City charter or mission that justifies subsidizing one sector at the expense of the entire city population. The decision to buy the motel was the worst financial decision ever made by a Steamboat Springs city council, and it needs to be fixed immediately by getting rid of the motel, swallowing the loss, and preventing ongoing future losses that will hurt City services for years to come.

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Amy Harris 4 years, 5 months ago

greenwash- it's immature to attack someone personally for making a very good point. The Iron Horse makes no financial sense for our city.

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mmjPatient22 4 years, 5 months ago

Oh it's a great location alright. Even the bed bugs and roaches agree on that.

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Scott Wedel 4 years, 5 months ago

The trouble with getting rid of the Iron Horse is that the stupid City would be forced to pay large penalties if they prepaid the bonds.

The City should be buying back those bonds so they could sell the Iron Horse.

Note how much the City is subsidizing these rooms. Losing $500,000K a year to provide housing for 28 rooms works out to just about $1500 a month per room.

BTW, the bonds for the Iron Horse only require interest payments for the first few years. In a couple of years when principal also has to be paid, the Iron Horse sucks far more money from the City budget.

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seeuski 4 years, 5 months ago

Take the loss now if that is the case because this economy won't be back for a while and most likely will get worse before it gets better. What will the P+I payment be per room? $2,500 a month maybe? This town is too small to add a redistribution of wealth like this, remember that when the property tax hike hits the ballots if we are lucky enough to vote on it.

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ybul 4 years, 5 months ago

Now you are talking too much sense Scott.

Though a question, as the city probably did not use their best judgement when entering into this, are the bonds fixed or floating interest rates. Given all the other floating rates tied to the base area redevelopment I would guess they are floating rates. If so then the "bonds - which need a vote" or certificates of participation probably do not have a prepayment penalty.

Just the interest alone at $368,000/year would offer a $750/month housing subsidy on all 40 planned units. This is a great reason why a vote for the city to take on debt should be required, not using certificates of participation which violate the spirit of the law. More discussion would have taken place and maybe a better solution would have come about.

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Scott Wedel 4 years, 5 months ago

The interest rate is fixed. In the City's brilliant financial opinion that started with the premise that buying the Iron Horse was a good idea, it end with the idea that interest rates were low and so should be locked in.

The bonds most certainly do have a prepayment penalty. Which is why it would be smart for the City to go into the municipal bond market and buy back these bonds. I looked it up a few months ago and a substantial portion these bonds have traded. Which is good news because it means the bonds have not been sliced and diced into crazy financial instruments that might have five different people owning different aspects of the same bond.

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AGM 4 years, 5 months ago

Scott W, this is potentially a very good idea. You said they have traded can you tell us what they traded for (I'm hoping at some significant discount to par).

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Scott Wedel 4 years, 5 months ago

I don't remember what price they traded for. It was in the range of typical for a municipal bond with that interest rate for that term. There did not appear to be any premium paid for them being SB bonds or because they had a large early redemption penalty. Presumably, because the penalty is so large, no bondholder would ever expect them to be paid early. So there is no premium on the bond's prices on the hope of collecting quick cash due to an early redemption.

I don't remember how to find that again. I had followed a link regarding municipal bond prices and found that I could look up SB. And then searched through SB's bonds to find the ones issues for Iron Horse. I think the site was like the SEC or where ever municipal bonds are registered.

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Fred Duckels 4 years, 5 months ago

Who made this financial deal? Council had a sizable turnover concerning this activity, let's not ruturn the same group for a sequel. One orphan is enough.

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ybul 4 years, 5 months ago

If the rates are low and not tied to the iron horse per se. Then looking into buying back some of the other bonds that are not fixed might be a much better option, with any extra capital or the proceeds from the sale. This as I can not foresee rates staying at these levels for too much longer (more than a year on the horizon).

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ride4fun 4 years, 5 months ago

In addition, aren't there lost real estate and other tax revenues from this property since it is government owned?

Factor these lost revenues into the analysis to determine the true cost to the city.

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Hammurabi 4 years, 5 months ago

The Iron Horse Inn was purchased with certificates of participation from a private entity. That entity is the "owner" of the property for the next 20 years. Once the certificates are paid (in 20 years) the city then becomes the legal owner of the property. The inn was not purchased with publicly traded bonds; that's the problem.

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MsRed 4 years, 5 months ago

The city should have NEVER entered in to this poorly thought out realestate investment.

Was there anything else they could have used those "certificates" for??

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larrylarry34608 4 years, 5 months ago

Please note that the $500,000 loss was based on the original projection without monthly rentals. The revenue contribution from current renters has actually served to reduce this projected loss. A higher level of monthly rental occupancy would reduce this loss even further.

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Jason Miller 4 years, 5 months ago

I've never been in the comfort inn in steamboat,but i have stay at the NEW West Inn in Boulder.There room make the Iron Horse look like the ritz in comparsion.Mr haines i would not hold your breath,i dont think they will let to many people stay through the winter.If i was i would start looking now before its to late.

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