Steamboat Springs City officials voted unanimously Friday to accept a new deal with U.S. Bank that would free up $2.5 million for construction of the base area promenade this summer. But that doesn’t mean the work will begin immediately.
“I’m willing to adopt this only if we agree not to authorize any construction until we see more numbers,” City Council President Cari Hermacinski said during the Friday night meeting at Centennial Hall. “I was elected, and I think it’s my duty to see the documentation.”
Hermacinski and fellow council members Jon Quinn, Scott Myller and Kenny Reisman were acting in their capacity as members of the Steamboat Springs Redevelopment Authority. They voted unanimously to support a plan that would allow them to spend the first $2.5 million of $5 million in bond proceeds but require them to leave the balance of the construction fund in a separate account until U.S. Bank is reassured urban renewal revenues will cover the debt or the city is able to negotiate new loan terms.
The deal was the result of negotiations between the city and U.S. Bank in response to a notice of default sent by U.S. Bank in April. Bank officials said the city was in default on the $17.5 million loan for base area work because of a change in the mill levy that the bank had not been made aware of.
Earlier this week, the bank had demanded that the city allocate $3.75 million from its reserves to guarantee that the loan payments could be made. City Council members balked at that suggestion. The city has not missed any of the loan payments.
The new agreement with U.S. Bank doesn’t require any allocation of city funds, but rather releases only half of the $5 million available for base area work.
“This agreement in front of you is not an authorization to begin expending funds,” City Manager Jon Roberts said. “This agreement tonight will resolve concerns and issues between the (urban renewal) authority and U.S. Bank and give U.S. Bank comfort the balance will not drop below that level.”
Reisman emphasized that the city is not encumbering itself further through the agreement.
“For the public record, these are not reserves,” he said.
Roberts said it would take at least two weeks before the city could be in a position to authorize the start of construction.
“We have a $4.5 million (construction) contract,” Roberts said. “We cannot move forward with that. We need to sit down with Duckels (Construction) and amend that contract. That needs to happen before there is any authorization for construction.”
City Attorney Tony Lettunich said it would be premature for the Redevelopment Authority to call another emergency meeting next week. He said the Redevelopment Authority probably could wait to reconvene until its regularly scheduled meeting May 18.
Lettunich said he thought it was important to act promptly on the offer from U.S. Bank.
“It does two things,” Lettunich said about the deal. “It resolves the security dispute, or misunderstanding, and makes both parties comfortable. Part 2 is the waiver of any default. The waiver resolves the troublesome default letter that we got. I think it’s important to adopt this tonight.”
Hermacinski said she was uncomfortable that she had not received updated financial projections on urban renewal revenues since the city prepared to borrow $17.5 million last year. In particular, she expressed concern that the downturn in assessed valuation for property tax purposes at the base of the ski area had been underestimated.
The Redevelopment Authority depends on growth in the property tax base to generate a revenue stream to back bonded indebtedness. That form of leveraging money is called tax incremental financing.
“When we approved this loan, we saw projections based on the assumption of a 20 percent decrease in assessed value and no new construction for 20 years,” Hermacinski told her colleagues. “We said, ‘That’s good. It’s a worst-case scenario.’ I think (U.S.) Bank was right to question that the (property tax) mills have decreased. I think now maybe we should consider a 30 percent decrease.”
Quinn said he had met with David Baldinger Jr. and Brent Pearson, of the Urban Renewal Area Advisory Committee, which advises the Redevelopment Authority on public improvements to the base area, and left reassured that current projections are not overly optimistic.
Hermacinski said she wants to be certain that funding the base area improvements doesn’t compromise the city’s ability to make crucial improvements in other areas.
“Urban renewal is important,” she said, “but the promenade is a want to have and a sewer plant is a have to have. We want to be sure the (tax incremental financing) can pay for it so the general fund is there” for expenses and projects the city must undertake.
Myller said he agreed with Hermacinski that it’s important to study updated financials, but he’s in favor of moving forward with the promenade construction.
“This is an important project for our community that we’ve been working on forever,” Myller said. “Are we satisfied with the $2.5 million construction scope? Or are we going to try to do something and get back to $4.5 million?”
Roberts told Myller that city staff would continue working with U.S. Bank to reach a comfort level that would result in the release of the second $2.5 million, as well as working toward long-term financing that would raise funds for a second summer of work needed to complete the promenade and the daylighting of Burgess Creek.