Wednesday, October 27, 2010
Steamboat Springs Steamboat Springs finance staff members have begun an audit of the Iron Horse Inn while a proposed new lease agreement awaits potential action Tuesday.
Boulder-based New West Inns, which has operated the Iron Horse since November 2009, is proposing a new rent structure of $10,000 per month, plus 10 percent of net profits from the preceding month. According to city documents and a letter from New West Manager Jesse Allison, that structure would enable New West to repay the city in a 30-month period for about $53,600 in owed rent payments accrued since March.
“We believe the quickest and most efficient means of eliminating this debt would be to combine a sustainable monthly payment, with a percentage of our monthly profits,” Allison wrote to the city in an Oct. 12 letter. “This would insure our ability to pay our debt in the leaner months and increase the payments during the busy, more profitable months.”
On Oct. 19, the Steamboat Springs City Council gave initial approval to the new lease agreement in a 6-1 vote, with a provision allowing a city audit of the inn’s finances. Councilman Jon Quinn cast the lone “no” vote, saying the audit should be conducted before approval.
“What we are voting on is a significant reduction in the lease that was agreed upon by two parties a year ago,” he said that night. “I’m fundamentally opposed to taking at face value something that represents a huge taxpayer dollar commitment.”
City Manager Jon Roberts said Oct. 26 that city sales tax auditors Rachelle Summers and Sarah Vale are conducting the comprehensive review of the inn’s revenues and expenditures.
“They’ve already begun work on it,” Roberts said. “It’s very similar to a sales tax audit.”
Roberts said although Summers and Vale plan to have substantial work on the audit done by Tuesday, it’s uncertain whether the audit will be completed at that time or whether they will choose to present their in-progress work to the City Council.
The new lease proposal follows the council’s Sept. 7 rejection of a previous rent proposal, for $3,000 a month plus 10 percent of gross revenue.
Anne Small, the city’s purchasing and risk manager, has said that agreement — put in place in the summer, before City Council action — equated to payments from the inn of about $6,700 for June and about $7,000 for July.
New West’s original Iron Horse lease, which the previous City Council approved unanimously in November, required $13,500 in monthly rent plus an annual payment of 15 percent of net operating profits.
City staff waived New West’s monthly rent of $13,500 for December 2009, January and February. The city then deferred Iron Horse rent for March through May as the inn struggled through challenges such as higher-than-expected startup costs and low-performing nightly rentals.
Iron Horse Operations Manager Jay Belyea said Tuesday that the inn had a strong summer, and he expressed confidence in the inn’s ability to meet the terms of the new lease agreement.
“We’re comfortable with this latest proposal,” Belyea said.
Like many members of the lodging industry, though, he noted that a trend of last-minute booking by consumers during the down economy makes winter projections tough.
“Individuals don’t book far in advance because they’re not sure where their personal financial well-being is going to be three months down the road,” he said. “But based on what we’re seeing over the summer … we think we’re going to be fine.”
The City Council also voted Sept. 7, and again Oct. 19, to accept proposals from potential new managers of the Iron Horse, which occupies two buildings on U.S. Highway 40 just south of downtown Steamboat Springs. Roberts said the city’s request for proposals has not been released.
“If we were to change management, we wouldn’t do it until the spring,” Roberts said. “We’ve not yet released the RFP, and we’ll have another conversation with council about that here on” Tuesday.