Steamboat Springs city officials voted, 6-0, on Tuesday night to seek new management proposals for the Iron Horse Inn. The council chose to make the move after several months of waiving and deferring rent for the current management company.

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Steamboat Springs city officials voted, 6-0, on Tuesday night to seek new management proposals for the Iron Horse Inn. The council chose to make the move after several months of waiving and deferring rent for the current management company.

Steamboat city officials buck Iron Horse lease

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Editor's note: This story has been corrected from its original version. The City Council did not vote to put the Iron Horse Inn up for sale Tuesday night. Instead, the council directed staff to seek new requests for proposals from property management companies interested in operating the city-owned Iron Horse.

City officials voted Tuesday night to seek a new property management company for the Iron Horse Inn. They also rejected a proposed new lease for the downtown property and demanded that its current operator pay the full rent deferred since March.

Steamboat Springs City Council decided unanimously — in a 6-0 vote, with Councilman Scott Myller absent and new member Bart Kounovsky sworn in hours earlier — to take several actions that could move the city toward, as City Council President Cari Hermacinski put it, “getting rid of this albatross around our neck.” The Iron Horse Inn has created significant financial burdens and management challenges for the city since a previous City Council bought it for about $4 million in 2007. The purchase was an effort to provide affordable housing for city employees during a time of skyrocketing property values.

City Council effectively declared that purchase a resounding failure Tuesday night.

The vote rejected a newer lease that has been effective since July 1 with Boulder-based operators New West Inns, which has operated the Iron Horse since November. Anne Small, the city’s purchasing and risk manager, told City Council that New West Inns did not pay rent from December through May. The city waived rent for three of those months and deferred it for three others.

New West asked the city to waive the $13,500 rent for December, Small said, because New West had to purchase new beds to replace twin beds the city bought during plans to house Colorado Mountain College students in the inn. The city agreed to waive December’s rent.

New West then asked the city to waive January and February’s rent, citing high start-up costs and “obstacles of reputation,” Small said. The much-maligned inn had a bedbug problem under previous management in February 2009. The city also agreed to waive January and February’s rents.

Finally, Small said, Iron Horse’s rent from March to June was deferred, during a period when New West brought in new management for the inn.

The new lease crafted during the summer was an effort to help the inn move toward profitability. That proposed lease required monthly payments of $3,000 in rent and 10 percent of gross profits. That equated to payments from Iron Horse of about $6,700 for June and about $7,000 for July, according to Small. She said last month that the new lease was implemented before council approval because Sept. 7 was the earliest it could be placed on an agenda.

The old lease, which the previous City Council approved unanimously in November, required New West Inns to pay $13,500 in monthly rent for the Iron Horse, plus an annual payment of 15 percent of net operating profits.

City Council’s vote Tuesday night ruled that the old lease never changed.

“We want the $13,500 per month that’s due as of March 1,” Herma­cinski said.

That means New West owes Steamboat Springs more than $67,000, accounting for the about $13,300 New West paid the city for June and July. Failure to pay that amount, City Council said Tuesday, would place New West in default. City Council directed city attorney Tony Lettunich to look into collection procedures should New West be unable to pay.

The inn includes two buildings between the Yampa River and U.S. Highway 40 just east of downtown.

Last month, operations manager Jay Belyea said all 26 units designated for long-term rentals are full. Most of those occupants are members of Steamboat’s work force, renting studios for $600 a month, he said.

The other building is used for nightly rentals, which have struggled.

City Council did not direct Small to include work force housing in the requirements for potential new operators, instead directing her to assess any proposals that might come in for the property.

“Any way we can offer this property to anybody is the best thing we can do,” Councilman Walter Magill said.

But the vote does not immediately mean Iron Horse tenants will have to find new homes, or that nightly rentals will stop. Hermacinski said the Iron Horse should continue functioning as long as possible to continue generating revenue.

Councilman Jon Quinn noted that allowing Iron Horse to pay $3,000 in monthly rent would have given New West an unfair advantage over privately owned hotels. He expressed concern that the inn’s financial struggles were not brought to light earlier.

“I have to admit, I’m a wee bit troubled by the timeline,” Quinn said. “There were warning flags a long time ago, and now it’s September.”

— To reach Mike Lawrence, call 871-4233 or e-mail mlawrence@steamboatpilot.com

Comments

beentheredonethat 4 years ago

brilliant! buy property, with our tax money, at it's peak and then try to sell it, at tax payers loss, at the market's lows.

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Fred Duckels 4 years ago

In this case as well as the AH fiasco, the market has wisdom far beyond that of our social engineers.

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Fred Duckels 4 years ago

It is my understanding that this property cannot be paid off early and I assume the interest rate is high.

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Brent Boyer 4 years ago

All:

There was a significant error in the original reporting and publication of this story. The City Council did not vote Tuesday night to put the Iron Horse Inn up for sale. Rather, council members directed staff to seek requests for proposals from other potential property management companies.

The online version of this story has been amended. It will be further clarified throughout the day, and a correct, complete version will be published in Thursday's Steamboat Today.

I sincerely apologize for the error.

Brent Boyer Editor 970-871-4221

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Scott Wedel 4 years ago

The other big, but barely noticed, part of the story is what in the hell is City staff doing renegotiating contracts and not telling anyone for nine months? City staff has been allowing these people to avoid paying rent since December and a new operating contract since July without public discussion at any point of these developments.

This is the same city staff that claimed to be completely shocked at the notice of default regarding base area redevelopment bonds, but had been in discussion with the lender for four months and knew that the issue was the bond specified revenues that were not there because of school district recalculated property taxes.

If I was on the City Council then I'd be asking the City finance dept if we should hold their paychecks for 3 months because it appears to take at least 3 months for them to publicly admit what they've been working on.

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Scott Wedel 4 years ago

The other lesson here should be how this once again should serve as a lesson of why the City should stay out of the property ownership and management business. Simply put, City government is not designed to deal quickly with issues and to make people's jobs dependent upon successful results. If this was owned by private investors then how many times would they have fired the City employees responsible for managing Iron Horse? It was a colossal mistake for the City to fail to respond to bedbug issues and thus allow Resort Groups out of a lease that had become very favorable to the City. And now this, deciding that 9 months rent doesn't need to be paid.

It should not be that hard to understand that the property owner has to manage the property. Even if a property management company is hired then the property owner has to make sure the property management company is doing a good job and paying their bills and so on.

It was not such a ridiculous conclusion back then to decide that City needed to provide affordable housing to their employees. It was an arrogant mistake to think the City should be the owner and operator of that housing. The City should have instead put up for bid that they would like to rent x number of units for 3-5 years. That would have had the added benefit of encouraging free market creation of units to meet that need. With the change in the market, that still would now be a bad deal because they'd be paying higher rents than current market, but it would not be an ongoing drama involving City staff and the cost of mistiming the market would have been in the tens of thousands of dollars, not the millions of the mistimed purchase.. And that contract would be expiring soon enough and the City could then decide whether to renew the contract at current market rates or whatever.

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Tubes 4 years ago

How, exactly, do you get a story so wrong (or commit such a 'significant error')??????

I mean...I know it's a free newspaper...but c'mon! That's pretty bad, dude.

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Scott Wedel 4 years ago

Tubes, Give them a break. Even the New York Times makes blatant errors:

Correction: September 8, 2010

An article on Tuesday about the effectiveness of various study habits described incorrectly the Heisenberg uncertainty principle in physics. The principle holds that the act of measuring one property of a particle (position, for example) reduces the accuracy with which you can know another property (momentum, for example) — not that the act of measuring a property of the particle alters that property.

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