Our View: Right move is to sign lease with New West Inns

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Editorial Board, October 2009 through February 2010

  • Suzanne Schlicht, general manager
  • Brent Boyer, editor
  • Blythe Terrell, city editor
  • Tom Ross, reporter
  • Michelle Garner, community representative
  • Paula Cooper Black, community representative

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The Iron Horse Inn continues to be an albatross around the city's neck at a time Steamboat Springs and its residents can least afford it. The city should sign a three-year lease with New West Inns and allow the property to be managed by a company with experience doing so.

Not only will leasing the property to New West Inns - a Boulder-based company that operates Steamboat's Comfort Inn hotel - minimize the city's annual loss on the Iron Horse during the next three years, it will give the city additional time to explore and develop long-term plans for the 2.36-acre property on the Yampa River.

The city, led by a previous City Council, bought the 52-room Iron Horse Inn in October 2007 for $4 million. The city used certificates of participation to fund the purchase, as well as $1 million in planned renovations and $235,000 in issuance costs, bringing the total cost to $5.3 million.

There's a 25-year payoff on the certificates of participation, and annual payments on the debt service could be as high as $480,000 some years. If the city were to pay off the debt early, it would be subject to what amounts to a prepayment penalty in excess of $1 million, and the city's future ability to secure bonds could take a significant hit.

The original intent of the purchase was that the property would provide affordable housing for city employees, but operational issues and expenses have resulted in mostly problems for the city.

The city initially operated the Iron Horse and rented rooms on a nightly and long-term basis. But projected operating losses and a desire to keep the city out of the housing business led the current City Council to explore leasing the motel to a private property management company. An agreement was reached in November 2008 with Resort Group to manage the property. According to the agreement, the city retained the right to offer some of the units to its workers.

But a bedbug infestation and the collapse of the economy doomed the agreement with Resort Group. The contract has been in dispute since February. The city, meanwhile, tried unsuccessfully to negotiate deals this summer with Colorado Mountain College and TK Mining to lease some of Iron Horse's rooms for students and mine workers. In June, a new request for proposals went out, and New West Inns was the only company to respond.

The deal now in front of the city would allow New West Inns to operate the motel as a nightly rental facility. New West Inns would pay the city $13,500 a month, or $162,000 a year. New West Inns also would share 15 percent of its net operating profit with the city, a deal that would net the city a projected $22,728 in 2010. The city would receive 20 percent of any net profits over $500,000.

City officials also say New West Inns might make some of the rooms available for long-term rentals, which could allow the Iron Horse to provide some affordable housing for the local work force.

The city should sign off on the three-year lease if for no other reason than it will minimize the loss of taxpayer dollars. The city's 2010 debt service on the motel is $343,000. The New West Inn lease would allow the city to recoup an estimated $184,728 in 2010, meaning the projected operating loss would be $158,272. The city stands to lose more than $200,000 if it continues to operate the facility as is, some city officials say.

In short, there is no easy way out of the Iron Horse mess. That's why the best option is for the city to finalize the three-year lease with New West Inns and continue to work with a local residents committee on developing long-term plans for the redevelopment of the site. Such redevelopment would not occur within the next three years, so the property lease would not pose an obstacle to continued planning.

It's unfortunate that no matter how the city operates the Iron Horse, it will be in competition with private business. But the city's No. 1 concern should be as a steward to the taxpayers. Therefore, sign the lease and minimize our short-term losses.

Comments

steamboatsprings 5 years, 1 month ago

This is a very sad legacy from a council that thought they knew all. Ken Brenner and Towny just knew this was right despite plenty of good advice to the contrary. Now our citizens a local businesses get to pay the price. They should be ashamed.

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sledneck 5 years, 1 month ago

That council did not THINK they knew it all; they KNEW they knew it all. When government attempts to create affordable housing the result is ALWAYS to increase the cost of housing and / or cost taxpayers like this example.

Government does not really even attempt to make housing affordable. Instead, it engages in dim-witted excercises designed to mask the true cost of housing or to remove that burden from the rightful reciepient and place it on another homeowner who then finds their housing LESS affordable.

If government wanted to make housing affordable they could. Reduce the requirements for developers. All the curb & gutter, sidewalks, bike trails, parks, open space, etc cost developers tons of money. And those costs are ALWAYS passed down to the homeowner. Government could also reduce the fees for building permits, property taxes, sewer and water tap fees, etc. (Building permits and tap fees, etc for an average home in Steamboat would probably exceed $ 15,000.00!) Heaven forbid we should use those methods to make housing more affordable. That would mean EVERYONE would benifit instead of just the kind of people government wants to "help". After all if people like SS City Council cant "rescue" certain targeted individuals from their duty as homeowners whats the point of their existance? It's laughable.

The current situation at the Iron Horse reveals the ignorance of both a city council and those who advocate for subsidized housing. With the money the city wasted here it could (not should but could) have given free building permits to the next 500 applicants. That would make housing more affordable! It could have given 10,000 taxpaxers (buisnesses and individuals) a $530.00 break on their property taxes. It could widen a long stretch of highway 40 west of town and that will be needed regardless of the 700 project! It could have done a lot of other, better things. But this move was a classic example of government knowing better how to spend our money than we the taxpayers. At 6% the interest alone is costing taxpayers $318,000.00 every year!

I have no doubt that affordable housing incentives will continue to be employed here locally. As an individual I am looking forward to it. All the stunts these nuts use to relieve people of their responsibility to pay their own way will serve to drive prices higher. As a property owner I am happy to let them continue but as a community member it is sad.

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greenwash 5 years, 1 month ago

towney and ken you should be ashamed.

cari and louie we are so proud of you you are both so smart.

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Fred Duckels 5 years, 1 month ago

Let's not reelect more Community Alliance surrogates to see if they have learned anything. How about all the property taxes that everyone seems to be forgetting about? I have said all along, the market will handle affordable housing with infinitely more wisdom than our social engineers. The opposition to the 700 identifies affordable housing more as a political tool than a social concern.

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JLM 5 years, 1 month ago

There is a very, very simple postulate at work here:

Governments should never, ever get into commercial enterprises which compete with those from whom their tax revenues flow.

There is a corollary of this at work in the current administration's desire to get into the automobile business, the health care business and the banking business.

The outcomes speak for themselves. The current Council should publicly reprimand their predecessors who have created this incredible fiasco.

Governments should set policy, not operate businesses. It is simple. It is immutable and stupid people ignore it at their peril.

Only results count!

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gravity 5 years, 1 month ago

Governments should never, ever get into commercial enterprises which compete with those from whom their tax revenues flow.

You mean like the military?

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Jeff_Kibler 5 years, 1 month ago

Shame, shame, JLM. You should have used the PC term "mentally-challenged posterior."

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JLM 5 years, 1 month ago

Gravity, my fine fellow, perhaps you might reconsider your comment in light of the fact that the military is not generally considered to be a "commercial enterprise" thus rendering your comment just a tad off the mark.

A careful reading of my comment would suggest my opinion was intended to be limited solely to "commercial enterprises". Please forgive me if that was not apparent. Perhaps I was inartful in expressing my thoughts.

As I pointed out earlier, my dear friend, the United States Marine Corps is really not in competition with any identifiable commerial enterprises whether private or public. Hopefully this distinction will enlighten you in such a manner that you may reconsider the appropriateness of your comment.

Thank you in advance for your thoughtful re-consideration and all the best!

Ta ta for now ---

JLM

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