Steamboat Springs City Manager Jon Roberts confirmed today that U.S. Bank has issued Steamboat Springs a notice of default on its $17.5 million loan for redevelopment at the base of Steamboat Ski Area.
The notice raises questions about whether the $4.5 million of base area work scheduled for this summer can continue as planned.
“We did receive a notice,” Roberts said today. “(U.S. Bank) gave us 30 days to provide additional security” for the loan.
The loan is backed by Urban Renewal Authority, or URA, revenues at the base area, and ultimately, Roberts said, by the city.
City Finance Director Debra Hinsvark said the city received the notice April 19. The notice does not indicate a missed payment or that a default has occurred, she said, but rather that the bank is requiring additional funds within 30 days to provide security for the loans. The amount of that security is under negotiation, but likely will total several million dollars.
“I’m hopeful that we can negotiate to an amount under $4 million,” Hinsvark said, adding that the money would be allocated from the city’s reserves.
She projected in March that once the city’s 2009 budget was finalized, the city would have about $14 million in general fund reserves. The city’s annual general fund operating cost, she said then, is about $23 million.
Hinsvark and Roberts said U.S. Bank sent the notice and asked for additional security because of a change in Steamboat Springs School District property tax assessments announced in December, about a week before the city’s loan was approved.
The school district, along with at least six other entities, assesses a property tax within the base area URA. The URA and its redevelopment projects are funded by increments of those tax revenues.
Thus, the school district’s collection of less property taxes than planned in the city’s approved, $17.5 million loan means there could be less revenues available to pay off that loan. That’s why U.S. Bank is requiring additional security, Roberts and Hinsvark said.
On Dec. 14, the school district approved a reduction in property tax assessments, or mill levies, for 2010, because the district had over-collected about $4.2 million worth of property taxes between 2007 and 2009. The over-collection occurred because of an incorrect interpretation of legislation involving the state’s Taxpayers Bill of Rights.
The city’s loan, approved Dec. 22, did not account for the school district’s decreased revenue stream this year.
Roberts emphasized that the city has not missed a payment on its loan, but said the decrease in school district taxes removes the loan’s safety net that allowed for fluctuations in base area revenue.
“Based on the current assessed valuation (of base area properties), and with the reduced mill levy, the URA (funds) are adequate,” he said. “With the reduction in mill levy, there is no cushion.”
The Steamboat Springs City Council is scheduled to address base area financing at 4 p.m. Tuesday in Centennial Hall.
“One of the options presented to council will be whether to delay the project for a year,” Roberts said.
For more on this story, grab a copy of Tuesday’s Steamboat Today.