Steamboat officials reach base area deal with bank

Agreement allows release of $2.5 million to start work as talks continue

Advertisement

If you go

What: Special meeting of the Steamboat Springs City Council, convening as the Steamboat Springs Redevelopment Authority

When: 5 p.m. today

Where: Centennial Hall, 124 10th St.

Contact: Call city offices at 970-879-2060 or visit http://steamboats... for more information.

— City officials reached a deal with U.S. Bank late Thursday that will allow the release of $2.5 million to immediately begin work at the base of Steamboat Ski Area, pending the deal’s approval in a special meeting tonight.

City Manager Jon Roberts said the agreement would allow the city to release the funds for base area work — meaning construction of a public promenade and daylighting of Burgess Creek could begin in a matter of days — provided that the remainder of this year’s funds, also about $2.5 million, be held in a construction account. That account was established when the city’s $17.5 million redevelopment loan, in the form of bonds backed by U.S. Bank, was approved Dec. 22.

“It doesn’t require us to restrict any funds; it doesn’t require us to deposit any funds,” Roberts said about the deal. “The entire agreement is half gets released and half gets held until we work out other financing alternatives.”

The Steamboat Springs City Council, acting as the Steamboat Springs Redevelopment Auth­ority, will meet at 5 p.m. today at Centennial Hall to act on the proposed deal.

Council approval would allow Duckels Construction to begin acting on the $4.5 million contract for this summer’s work that the council awarded Duckels last month. The city has not signed the contract or released those funds because of ongoing negotiations with U.S. Bank.

Roberts said he was not sure whether the scope of construction this summer would change.

“As soon as we can get this deal approved, then we can authorize Duckels to begin work,” Roberts said. “We need the City Council to approve the agreement, then we’ll sit down with Duckels and explore how we move forward now with this new agreement with U.S. Bank.”

City attorney Tony Lettunich called the agreement “a big breakthrough” in financing negotiations with U.S. Bank that accelerated April 19 when the bank sent a default notice to the city of Steamboat Springs. The notice said the Redevelopment Authority was in default on its $17.5 million loan for base area redevelopment work because of property tax rates that decreased without city documentation, and were not changed in the loan conditions, before the loan was approved Dec. 22.

The bank had required the city to provide $3.75 million within 30 days from the notice as additional security for the loan.

On Tuesday night, the City Council decided to postpone action on the notice until May 18. Several council members opposed the idea of using city reserves to provide the $3.75 million in additional loan security.

“On Tuesday night, the council did not accept the proposal of depositing additional funds or restricting additional funds, which was the request from U.S. Bank,” Roberts said. “I think the city not accepting that proposal then resulted in U.S. Bank exploring other alternatives to deal with the project.”

Roberts said the tone of negotiations changed Wednesday and Thursday.

“I think (U.S. Bank) moved in a direction that was more beneficial to the project,” he said.

Roberts said the city would continue negotiating with U.S. Bank about the remainder of the funds and continue looking at other financial options.

Roberts and Lettunich ackn­owledged the hasty announ­cement of tonight’s meeting. Lettunich said notice of the meeting was published Thursday afternoon at the downtown post office, in Centennial Hall on 10th Street and in City Market in Central Park Plaza. The Redevelopment Authority’s bylaws allow for public notice of a meeting 24 hours before the meeting, he said. State open meetings laws allow for posting notice of a public meeting at least 24 hours beforehand.

Roberts said the intent of moving quickly was simply to help get the base area work under way.

“The interest is getting the project commenced as quickly as possible, to get as much work done as possible during this construction season,” he said.

Roberts gave an audible sigh of relief Thursday when talking about the U.S. Bank agreement.

“It’s been a wild rodeo,” he said.

Comments

John Fielding 3 years, 11 months ago

.

It seems to me to be a reasonable step. We certainly ought to consider other financing options as well. And if in the end posting additional security seems a favorable option it need not necessarily be from reserves, other types of financial instruments can be used.

US Banks action was ill considered. The Councils reaction was uncertain at first but has shown improvement. The public's responses have run the entire range from unperturbed to hysterical.

We do live in a time of economic troubles that have everyone on edge. Our actions have generally been to hope for the best while we prepare for the worst, very sound really. Lets continue to keep the belt tight on routine spending but not stop the capital investment that will enable our future prosperity.

To draw an analogy to my personal situation, we now eat more chicken and soup instead of steak and asparagus, but we still come up with the money to keep our business moving ahead.

.

0

ybul 3 years, 11 months ago

Yes making capital investments are a good idea. However, the kind of capital investments really should be considered. Those at the base area may not yield the results that we are looking for. Just because the main economic driver for the valley has been the ski mountain in the past, does that mean making this investment is going to yield the results desired in the future?

Will property values in the URA and sales tax (should increase year over year but that is not saying much as many shops closed last year) stay above the baseline in the long term? Yesterdays short term plunge in the stock market should give everyone pause who thinks that we are on a rebound.

Yes John we try to find the capital in my business to make capital improvements which are income producing. I question wether this will actually cause any new money coming into the valley or if it will simply cause a financial drain on the coffers of the city. Buying equipment to increase production would be a different story. Buying a building to insert some shop, would will draw people here because it is unique but needs help getting started is a different story.

Steamboat has been one of the more profitable ski areas without having these "window dressings" , how will they increase the city sales taxes, which you are looking at jeopardizing by saddling the city with debt service payments and taking away from core services the city should provide.

If you are really looking at investing in the community then why not look at something that will bring in peoples money into the valley without needing them to fly in, which is expensive and if the markets decline again (I would guess that is the case) then our tax base is going to continue to fall. Maybe taking those dollars and working with local ranchers to develop a coop which produces lunch meat, beef jerky, other products to ship to the front range, SLC and beyond would be a much better use of the money and when the project is done will actually employ people which a sidewalk will not. Add value to another product which is already produced here. A sidewalk adds value but of a very intangible nature. The city really needs to look at diversification.

0

John Fielding 3 years, 11 months ago

.

ybul you are right about diversification, and we do have some financial support for it but very limited at this point. It is mainly spent trying to figure our what business can be attracted here and in general promotion of the assets of this area.

We need more good ideas from our people about what to focus on. Your suggestion of something that promotes our beef industry is excellent, I seem to remember something happening there a few years ago, but more detail please.

I maintain that two avenues we are moving along presently will be fruitful, Bike town USA and Education Capital. Each of these, like ranching promotion, uses assets that ate already well developed. Biking can be ratcheted up quickly and has excellent potential for fueling the existing businesses. Education takes longer, but is year round and creates a very broad range of opportunities. In addition it receives substantial investments from the public sector,one item on which all that overspending in DC and Denver could actually be put to good use.

But do not dismiss the value of the existing plans too quickly. The promenade in particular will create a tool, a place where events can be staged. That is exactly the sort of tool that is most useful to create business for existing shops and lodges, and not just at the base area. Once the people are here for an event they spend time and money all over town.

We have a good plan in operation here, it has taken a hit or two from the economy, no surprise, but is still sound overall. Lets continue to roll with the punches and move ahead. And lets get serious about diversification, create an advisory commission and fund promotion aggressively. If we want our kids to have opportunities here we need to create them now.

.

0

ybul 3 years, 11 months ago

The opportunities that are being created today are for low end service type employees. While the plan may have been good given the previous 30 years of economic history, it may not be so good going forward.

If the goal of these plans is to provide opportunities for our children, then I think you best rethink what you are doing. We are creating opportunities for low end service sector jobs, not much more, by building a sidewalk to make an experience "better", in whose eyes and what constitutes that? Just because it is more expensive and looks nicer does not make it better. The warm happy people are what make that, a sidewalk with heating incorporated into it does not add any future employment, only a perceived better experience.

On the other plans for diversification, I really prefer not to get into it on a blog any longer as I am working towards those goals and if you know me you know what they are. I do have a contract with a small branded beef program in St Paul/Minn... area to supply them with 250 head this year to develop our supply chains as a low input/high quality operation is what I am looking for (sustainable with fuel prices at $10/gallon which kills all operations that bail hay).

Their goal is to grow into the Denver market next with a local producers name associated with it. Though I can not grow all the product that the market will require, they have a good model and are growing by leaps and bounds, buying beef in any place in the country that can provide them today. The piece of the puzzle that is missing is a high quality processor that uses all of the pieces of the animal to keep the cost structure in line with the big boys and potentially lower.

0

John Fielding 3 years, 11 months ago

I know you only as ybul.

You refer to the low end service jobs as if they are undesirable. Please keep in mind that each of them supports the food chain, so to speak. Each of them requires food, housing, recreation venues, and so forth. My daughter held down two of those jobs while attending college here. And many of the opportunities will be for small business owners.

My point is that the base area improvements are not just a sidewalk, it creates useful spaces where creative minds will find opportunities that will provide widespread benefit.

0

blue_spruce 3 years, 11 months ago

"...Just because the main economic driver for the valley has been the ski mountain in the past..."

don't hold your breath for an "alternative" economic driver....there is none, and it would be an enormous stretch to assume that we could "create" such a situation. the cost of living up here in routt county is prohibitively high, and this will not change.

the ski area and related tourism is what we have. without skiing we could not exist. lets no kid ourselves into thinking that there could be some "alternative" path we could pursue...

0

ybul 3 years, 11 months ago

I think that skiing will still be the main driver. I just do not see much growth in skiing in the future. If we have kids, then more jobs are required to support us.

John - ybul is the phonetic spelling of my last name, because no one can pronounce it correctly the first time, I am not really hiding behind an alias.

Yes we need low end jobs also, but with the cost of living here, should we be trying to create more low end jobs or higher end jobs? That is the question, what is the goal of the marketing, simply to create more or to create a higher quality of living. Yes it is not going to happen over night but what is the goal of a sidewalk?

Yes there is more to it than a sidewalk that creates space for people. However, in saying yes to these projects what are you saying no to, especially if you are tying up city reserves, go to go brand cattle now. Probably can't reply again to the thread.

on the high cost of living this is not a box canyon like most other ski areas with plenty of private land, the recent foreclosure sales in Hayden with lots not selling at $30k (a couple did), the cost of living is going to come down. Second homes are on the downswing with the current financial climate. People are trying to hold on to the high prices they saw in the past and those are gone.

0

Steve Lewis 3 years, 11 months ago

The new deal requires that "...the remainder of this year’s funds, ...about $2.5 million, be held in a construction account."

Given that, I don't understand how Jon Roberts can say, “It doesn’t require us to restrict any funds; it doesn’t require us to deposit any funds...”

Huh.

Things are very unsettled in our economy, and the local trend is still down. John Fielding, you are willing to take on more risk, but I am not. We could need those reserves for more critical expenses.

I agree with Walter Magill's earlier comment that we should not use reserves to finance construction this year. These conditions propose just that, from my reading of this article.

0

John Fielding 3 years, 11 months ago

.

No risk = no reward.

How many more conventions, concerts, arts fairs, Oktoberfests might we host that would be attracted by the improvements? How many will it take for the investment to be worthwhile? How many winter visitors will see the steady pace of improvements and decide to return instead of trying someplace else next year.

It is especially important in these times to be more competitive with the sister resorts, and for a sense of commitment to a better future to be apparent to all.

The future will be what we make it.

.

0

insbsdeep 3 years, 11 months ago

I am for the daylighting of the creek, and the fancy sidewalk. I don't think it's wise to pull money out of our city reserves to fund it, but we need to show some effort of improvement at the base. The greedy developers, or the ski corp should come up with the additional money to secure the loan. Oh wait they are pretty much the same people and can't afford to do much now. I would like to know how much Ski Corp is contributing to this project since they are likely to benefit from it greatly.

I really can't believe a performance bond or better plan was not in place, before all of STS was torn down. Tourism is our industry. We have a lot of appeal other than just skiing, and we need to continue to promote them. We need to not turn people off by having a dumpy base area. If Atira can follow through with it's stuff in STS, the creek is opened, we have a nice walkway, and ski corp builds some sweet bike features at the base, a year from now it will be much more desirable place. That is a lot quicker then anything will get built in STS. I also hope the plan has designed in a nice concert venue for headwall.

0

ybul 3 years, 11 months ago

So how much money are you putting up for this John? It is easy to take on risk when that risk comes out of someone else's pocketbook. I took risk this year, in buying cattle, though I stopped once the risk reward ratio was out of line.

There is a tremendous risk of the real estate market continuing to decline and thus property taxes, sales taxes in the URA will probably go up, but enough to offset a potential decline in Property taxes?

It is mighty easy to play with other peoples money, there is almost no risk to you personally with constructing the project, yet there is probably a reward. I love the capitalistic system we now have which rewards to private enterprise and the risk and downside to the public. All of the described improvements are great, however, is it the time for them to be implemented.

Taking the money and building bike trails is probably a much better investment.

--conventions--

Not too many

--concerts--

Strings has done a great job of raising capital to fund them. I really doubt that we have the facilities to have a big show draw people to Steamboat Springs, because of the limitations on the size of a venue.

--arts fairs--

Maybe one? how much additional revenue will that create, will the vendors actually want to return to Steamboat Springs? Seems to me that they have a circut that the vendors travel and how many would be willing to come back to the same town twice in a year?

-- Oktoberfests--

We have one is that enough? Seems to me that the participants get a little sloppy and may not care. The participants would probably prefer cheap beer over anything.

One only needs to look at the lodging discounts this year to realize that people are out for value today and given the prospects of retirement, will probably continue to be value based shoppers. That said, those value based shoppers might be willing to have a little more rustic, yet clean, experience to keep the vacation costs down.

What happens if no new funding source is found, it seems to me that people are shying away from risk and with California near defaulting on its debt, Greece's debt rating downgraded to junk, who is to say what the ratings agency will give the URA for any new bonds, so that US bank does not need to guarantee them. US bank probably already is rating them near junk status to want half the money held to ensure debt service payments can be made.

So what if we start can't find new financing and can't complete the project? What happens if revenue in the URA continue to fall, who gets stuck holding the bag - you want to John, such an ardent supporter of the project. How about cutting the police force, fire, snow removal so no one can get to the ski hill? Sorry but these are trying times and yes investment needs to happen, but who assumes the risk of such a gamble if such gamble goes south?

0

John Fielding 3 years, 11 months ago

.

We taxpayers assume the risk, already have really. My investment in the project is exactly the same as any other Routt County taxpayer, adjusted for the value of the assets being taxed. The value of my home is almost exactly the supposed median for Old Town, so my stake is the same as most of my neighbors.

I don't know the numbers exactly, maybe someone will fill them in, but if the project costs $20 million over 20 years divided by 50,000 people in the county that,s twenty bucks apiece per year. I have 5 in my home so my share would be a hundred bucks a year if it was divided up that way.

Now I know there is more cost, and the shares of valuable properties are much higher than the average home and so forth. My share is probably much lower, but if it is a hundred that's ok with me.

That would be about 5 percent of my tax bill so I guess it can't be that high. And honestly I can't say I can afford it right now, I deny myself stuff like a hot dog for lunch to save money, its that tight.

But to me it is a lot like roads, or airline subsidies, or community centers. We all share the costs, some of us benefit more than others, but the benefit is widespread.

There is a risk that it might not produce as much as we hope. But if we do not build it it certainly cannot produce anything at all. The risk is the price of a few lunches per year, I'm ok with that.

.

0

ybul 3 years, 11 months ago

You fail to assess the risk that if we build it and the URA is short in revenues then ONLY the city will face an impact. That is why US bank wanted the city to place reserves in an account to guarantee that those bonds would be good.

So in your scenario there are 50,000 residents, when only the city residents will be on the hook so 10k making your share $500/year, in your math. That is about 25% of your tax bill getting a little higher. If you can not afford it at the lower figure then maybe you can not afford it at the higher number.

I do not know all that the $17.5 has been spent on, but at 4.5% that is about $800,000/ year that could fund the airline program etc.. What would do more for the community.

If the project is started and now new funding sources are found, then the project needs completed with city reserves or the bond funds which need guaranteed by city reserves. Those reserves are tied up until the bond is repayed. Putting the city in a position that it does not have the same level of reserves as it had before and in closer to the point of legal requirements in the state of Colorado. Taking away the flexibility it has in being able to dip into reserves to fund an emergency need.

0

John Fielding 3 years, 11 months ago

.

OK yubl you have convinced me to reconsider the risk acceptability.

If you are correct that the intended funding mechanism of a property tax stream from the base area can somehow be supplanted involuntarily then there is an unacceptable loophole.

If the plan includes contingencies to extend the payback period if necessary, using City guarantees as required so the funding ultimately remains coming from the intended.source, then that is a good provision for a worst case scenario.

Does anyone know if such a provision exists?

.

0

ybul 3 years, 11 months ago

The risk is in a worst case scenario, which given credit markets again thanks to potential national debt defaults is on the radar. Thus why US bank wants more guarantees.

0

ybul 3 years, 11 months ago

Also on the Ski hill being the main economic driver, it still will, my only question is wether to invest in it or other areas to continue economic expansion. The ski area should be able to stand on its own and other areas should be invested in, such that a broader foundation is developed.

Those investments can be in areas which help tourism. Though resources are scarce and thoughtful deliberation needs put into what will make the biggest gains for economic activity for the community. Like the bike trails or ???.

0

Requires free registration

Posting comments requires a free account and verification.