Iron Horse Inn may stay under city management

Committee could recommend City Council reject 3 proposals

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— An evaluation committee likely will recommend next month that city officials accept none of three proposals for operation of the embattled Iron Horse Inn.

That means the city of Steamboat Springs could continue as operator of the Iron Horse, which offers long-term and nightly rentals in two buildings on U.S. Highway 40 just south and east of downtown Steamboat.

The city terminated its lease agreement with former Iron Horse operators New West Inns and took over management of the Iron Horse in January. Boulder-based New West had operated the Iron Horse since November 2009 and encountered a series of financial troubles that left New West owing the city about $77,000. That debt remains, and the city is considering legal action against New West.

The city sought proposals last month from potential new operators of the Iron Horse. Deb Hinsvark, the city’s finance director, said none of the proposals showed sufficient promise in interviews Monday.

“The recommendation to (Steamboat Springs City Council) really is going to say that we didn’t see anything that would cause us to move away from what we’re doing right now,” Hinsvark said.

Anne Small, the city’s purchasing and risk manager, confirmed Hinsvark’s view.

“That’s correct — we just didn’t feel that we could recommend any of the three proposals we received to (the City) Council,” Small said.

The committee is scheduled to present its recommendation and options for the Iron Horse’s future to City Council on April 5 in Centennial Hall.

Small confirmed that the three applicants to operate the Iron Horse were Chris Stillwell, former co-owner of the Nite’s Rest Motel in downtown Steamboat Springs; Steamboat resident Danny Weiss, whose family is a big player in local housing rentals and property management; and Jim Cook, of Colorado Group Realty.

Small said she could not discuss specifics of the proposals.

“Our procurement and contracting (policy) states that we don’t release the contents of any proposals until a contract has been issued,” Small said.

Stillwell and Weiss could not be reached Tuesday.

City Counci member Jon Quinn, a member of the evaluation committee, said those two proposals involved a similar format to current operations and didn’t warrant a change.

“Neither was a bad proposal, they just sort of replaced an apple with an apple,” Quinn said.

In that metaphor, Cook’s proposal was an orange.

Cook said his proposal also involved Jens Owen, of the Storm Peak Innovations technology incubator, and Noreen Moore, former business resource director for the Routt County Economic Development Cooperative.

“We were trying to put together a facility that would be an incubator for tech industry (entrepreneurs), where we could bring together those people — a lot of which Jens has mentored — that can congregate in one place and possibly live together, and have a meeting facility and business center that would help them come together and develop software or whatever it is that they’re doing,” Cook said Tuesday.

He said the proposal involved only the Iron Horse’s nightly rental building. The group proposed renting rooms to entrepreneurs, while also using the space for an independent economic development authority.

Cook said he learned Tuesday that the committee would not recommend the proposal to City Council.

“While I think they viewed our proposal with great interest … I think the final decision they made was probably a good fiscal decision, and therefore I don’t feel that badly about it,” Cook said. “I think our idea was a great one, and I’d like to see it happen somewhere else.”

Quinn said the tech incubator idea “wasn’t quite fleshed out enough,” in his opinion.

“It was broad strokes,” he said. “It had some really interesting potential, but it wasn’t fully enough formed for the committee to recommend.”

Escalating debt

The Iron Horse evaluation committee included Small; Hinsvark; Quinn; City Council member Walter Magill; Planning and Community Development Director Tyler Gibbs; Dean Vogelaar, president of the Steamboat branch of Mountain Valley Bank; Dale Mellor, finance director for the Steamboat Springs School District; and Wade Gebhardt, of the Steamboat branch of Wells Fargo bank.

Vogelaar, Mellor and Gebhardt are members of the Steamboat Springs Building Corp., a legal entity established to enable the city’s financing of the Iron Horse.

City Council members Meg Bentley and Bart Kounovsky originally were slated to serve on the committee, but removed themselves because of conflicts of interest with applicants.

The Iron Horse has faced significant challenges since the city issued nearly $5.3 million in certificates of participation — debt similar to bonds, sold to investors — to buy the Iron Horse in late 2007. Steamboat Springs City Council previously viewed the inn as a source of affordable housing for members of the local work force.

The certificates stipulate that the city not pay off its Iron Horse debt in full for 10 years, in order to guarantee a certain level of return to investors through interest. Six years are left on that deal.

Hinsvark said the city paid nearly $340,000 in Iron Horse debt in 2010. That amount addresses only interest. The outstanding principal balance remains at nearly $5.3 million. She said annual principal payments of $45,000 would begin next year.

The city’s annual total debt payments for the Iron Horse will increase each year until reaching about $480,000 in 2014, she said. Annual debt payments will remain at that amount, Hinsvark said, until the inn is paid off in 2032.

“Unless we find a buyer for it before then,” she said, noting that selling the inn will become less financially cumbersome in 2017, because of the certificates of participation terms.

Jay Wetzler, of Steamboat Hotel and Bunkhouse Lodge, said Tuesday that continued city operation of the Iron Horse could present challenges for the local lodging industry.

“It does make things a little bit touchy for the rest of us because we’re always looking over our shoulder, wondering what their rates are, because we have to compete with them,” he said.

— To reach Mike Lawrence, call 970-871-4233 or e-mail mlawrence@SteamboatToday.com

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