City receives default notice on base area loan

Roberts: U.S. Bank has given city 30 days to provide “additional security”

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— 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.

Comments

Scott Wedel 4 years, 7 months ago

City Finance Director Debra Hinsvark said the city received the notice April 19

April 19th!!!!!!! So they decided to proceed with this year's base area projects WHILE NOT TELLING THE PUBLIC THIS TINY LITTLE DETAIL THAT THE CITY WAS GOING TO BE FORCED TO COMMIT MILLIONS FROM THEIR RESERVES TO COVER THIS BOND!!!!

IMPEACH NOW!!!!

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Mike Lawrence 4 years, 7 months ago

Hi Scott, City Manager Jon Roberts has not yet signed the $4.5 million contract for Duckels Construction, nor released those funds for this summer's work. How to proceed will be up to City Council on Tuesday night. Roberts told me today that he has notified Duckels of the situation. I apologize for not making that clear in this initial version of the story. Check back later this evening, or in tomorrow's newspaper, for more details.

Thanks,

Mike Lawrence Reporter Steamboat Pilot & Today 970-871-4233 mlawrence@steamboatpilot.com

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Scott Wedel 4 years, 7 months ago

Well, when did who know what about the default notice?

This article says that the City knew on April 19th and yet did not inform the public until today.

If the City Council knew of this when they approved Duckels contract then they are going to have to explain why they proceeded without resolving the whole issue of base area funding. Note that the default is just the tip of the funding issue because as the bank recognizes, the school district ruling significantly reduces future funding for the base area redevelopment agency because now the base area is unlikely to ever exceed the baseline for the school district's property taxes. And that is on top of likely downward assessed valuations that will also push down revenues.

If they City Council knew nothing about the default notice then the city finance dept keeping that sort of secret from the City Council and the public while important decisions are being made. That is completely unacceptable.

That the City can still stop Duckels contract is little consolation. That means we put Duckels and the other bidders through that whole bidding process resolution meeting knowing that there was a good chance the contract was going to be voided.

Unless the default notice is actually dated April 30th or May 3rd then something very important was kept secret far too long and there is something very wrong going on in City Hall.

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Scott Wedel 4 years, 7 months ago

And it also means that the public is left with literally hours to learn about these issues before critical decisions are made.

(To go a little off topic, once again I am comforted that the public rejected SB 700. SB City Hall has a truly exceptional ability to mess up projects).

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Scott Wedel 4 years, 7 months ago

"Roberts told me today that he has notified Duckels of the situation."

So they informed Duckels but not the PUBLIC!!!

RECALL THE CITY COUNCIL. FIRE EVERY LAST * THAT KNEW ABOUT THIS TWO WEEKS AGO AND KEPT IT SECRET FROM THE PUBLIC.

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Harvey Lyon 4 years, 7 months ago

Gosh, total layman here, but I think this reflects the fact that loans now are based on proven tangible assets. I for one have a house appraised by Routt County at 3/4 of a million $$ and they've never stepped inside and seen what raising 4 kids can do to a house.

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Scott Wedel 4 years, 7 months ago

It doesn't really matter exactly why the bank sent the foreclosure notice. That has to do with the details of the agreement signed by the City and the bank.

What matters is that the CITY KEPT THIS IMPORTANT FACT SECRET FOR TWO WEEKS WHILE FURTHER DECISIONS ON THIS TOPIC WERE BEING MADE.

All I can think of was that they hoped they could "fix" this issue while keeping it secret. And now that they could not get it secretly fixed quickly that they had to disclose it. So the problem is not just the facts of the URA situation getting tough, but this whole philosophy of KEEPING IMPORTANT FACTS FROM THE PUBLIC!!!

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pitpoodle 4 years, 7 months ago

Heads should roll. The first head to roll should have been the person who "leaked" information during the bidding process. Are there no ramifications when employees do a bad job and cost the city thousands of dollars? The second head should have been the city employee (I assume supervisor or head of department) in charge of the bidding process. This current issue brings the words "bad job" to new levels. Unfortunately, it tells the public there is no accountability in SS government.

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