Rob Douglas: Time for clarity regarding infrastructure expenses

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Rob Douglas

Rob Douglas' column appears Fridays in the Steamboat Today. He can be reached at rdouglas@SteamboatToday.com.

Find more columns by Douglas here.

Five weeks ago, in a column titled “Yampa street deal unfair to citizens,” I opened with the following paragraph:

“As Interim City Manager Deb Hinsvark, Public Safety Director Joel Rae and a majority of the Steamboat Springs City Council work at breakneck speed to consummate a real estate windfall to Big Agnes, Honey Stinger and BAP — while spending upward of $10 million from its reserve fund to build new police and fire facilities — city property owners may be unaware that Hinsvark and the council soon will hit them with a new tax (they’ll call it a fee) to pay for approximately $10 million in stormwater infrastructure improvements.”

My argument was best summed up with this statement: “It’s unconscionable to spend millions of dollars — which painstakingly were accumulated under the proffered rationale of having funds for infrastructure ‘needs’ — on extravagant new police headquarters when those funds could be used to prevent the need for property owners to pay for stormwater infrastructure.”

Evidently, the column upset Hinsvark. The same morning the column ran, Hinsvark sent the following two paragraphs by email to the City Council:

“Well, I’ve read Rob’s Friday sermon and feel you may be sidetracked by citizens asking you about it. So, I thought I’d provide a little financial perspective to help you communicate with your constituents. First, he is simply wrong about the Big Agnes benefit approaching $2mm. The Big Agnes sale reeks only of economic development. Only time will determine the benefit to the Yampa St. revitalization and its ultimate benefit to the City.

“Regarding the stormwater needs. The City has never had a city-wide stormwater plan. We have NO (emphasis Hinsvark’s) idea of the infrastructure needs to complete an integrated plan. It could be $3mm; it could be $100mm. It’s a totally new city requirement and should not be expected to be accommodated from our general fund revenues. Think of it like moving from a volunteer fire company to a professional, paid fire company. It’s time the City did it — but there are no new revenues to accommodate it. And it’s not a one-time thing — it will be an ongoing program. A stormwater fee is the ‘norm’ for communities throughout Colorado.”

Clearly, Hinsvark was concerned that the council might get “sidetracked by citizens” asking about whether the city was about to give Big Agnes a sweetheart real estate deal — the council will vote on that deal Dec. 18 — and whether property owners soon would be hit with a new fee to fund millions in stormwater infrastructure upgrades.

Since my column and Hinsvark’s talking points email to the council, the Steamboat Today has done fresh reporting on both issues Hinsvark took exception to in my column.

On Oct. 31, in “Unbuilt land figures prominently in worth of Steamboat’s downtown commercial property,” the Steamboat Today gathered significant information and data on how to value downtown commercial properties. Based on that reporting, it is clear that Steamboat residents would be subsidizing Big Agnes with an amount far closer to $2 million than the $900,000 estimate Hinsvark has proffered.

On Nov. 10, in “City of Steamboat Springs considering fee system to pay for stormwater upgrades,” Hinsvark acknowledged to the Steamboat Today that city property owners could be hit with stormwater fees to pay for untold millions in stormwater infrastructure upgrades as soon as next year. Further, just as she did in the above cited email, Hinsvark indicated she thought those fees should be an additional burden placed on property owners instead of finding room in existing and future city funds.

This is not about a tit for tat with Hinsvark.

It is about whether the residents of Steamboat are being presented with a straightforward, complete and timely picture of what future infrastructure expenses they will be asked to shoulder and whether, given those expenses, it makes sense to be executing a potentially multimillion-dollar giveaway to Big Agnes while simultaneously triggering an eviction countdown clock that will force the city to build new police and fire facilities it does not need at this moment in time.

Arguably, that’s an open question.

To reach Rob Douglas, email rdouglas@SteamboatToday.com.

Comments

Scott Wedel 1 year, 9 months ago

I think if SB City goes forward with the sales to Big Agnes then it will send out shockwaves that will deeply change city government for years to come.

Comparing amount of revenues per citizen, it is clear that SB City government has a lot more money to spend than a typical city. Thus, any financial crisis will be self inflicted from incompetent handling of their money as compared to being a genuine lack of resources.

But the City appears intent upon destroying it's finances in order to give a downtown property to Big Agnes at a deep discount and to build new police and fire stations without having to ask for voter approvals. Thus, for the weakest of reasons the greatest of decisions is being made.

Suddenly Yampa St is too busy for a fire station. Apparently, the numerous fire stations on busier streets in bigger cities is irrelevant. The only fact that seems to matter is that Yampa St is busier than it was before.

The police dept have said their current offices are too small for at least a decade. While they may have valid issues, it certainly is not critical.

And literally no competent organization ever decides to sell their current essential buildings and later decides where to move.

These mind blowing bad mistakes being considered by the City Council will not go unnoticed by the public. As bad as the Iron Horse decision was, it was still only less than 1% of the overall budget for a decade or so. As bad as building a new terminal at an airport where the short runway meant it could only be served by one type of airplane that was used by only one airline that was in financial difficulty, it too was about 1% of budget for a few years. And they found a commercial tenant to largely cover those costs.

The Big Agnes catastrophe is talking about blowing 20% of a year's budget. And that is if things go well. That is just a projection for a project that has not only not been put out to bid, they haven't even decided on a location and what to request to be built!

I think there will be a taxpayer revolt that severely limits the powers of a city council to act without a public vote if this city council contrives to make such a bad decision that is intentionally structured to not need voter approvals. Voters can easily enough make sure no future city council can make big decisions without voter approvals.

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Kriss Bergethon 1 year, 9 months ago

So Hinsvark's reply can be boiled down to: "We're trading a known asset at a discount for an unknown liability, in order to receive a benefit we'll probably never be able to measure. Also, we should ask citizens to pay for a project that has no plan or budget." Government at its finest. Any business person realizes in times of distress, as the city is in now, you have to get the most out of your assets, and minimize your liabilities as much as possible. The city is taking the exact opposite approach.

On the other side, its time for BAP to end its silence. If the company is really holding a sword over the city's head, as so many city employees have implied, they need to come out and tell the people that are going to be subsidizing their new headquarters why. Why is your decision to stay in Steamboat seemingly based entirely on a sweetheart real estate deal? If things are really that tight financially, why not develop one of the countless empty lots on the west side of town? Those lots would surely have a tiny fraction of the development, entitlement, and demolition costs that the downtown lot would, even with the city's discount.

My suspicion is that they want what every successful, lifestyle-oriented business wants: a flagship store and headquarters that will make the owners and employees proud and help their 'we live what we sell' credibility. And there's nothing wrong with that. And a spanky new HQ right on the river with a ski hill out every window goes a long way toward that, no doubt.

But the city should realize what they have. For all the hand wringing over what to do about Yampa Street, they have forgotten what a tremendous asset and opportunity it is. An underdeveloped street with river frontage in one of the world's premier ski resort towns? Where else in the world would you find relatively affordable real estate in a location like that? $2.5 million wouldn't get you a parking space on the river in Vail, Aspen or Telluride. Savvy managers would be setting up an auction, not a backdoor discount.

If the local company wants to stay and need some help to do so, fine there is probably a way to do that. But short-selling the one thing the city does have (that being prime downtown real estate) in this time of relative scarcity is foolhardy.

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Martha D Young 1 year, 9 months ago

Thanks Rob, Scott and Kriss for your comments. When will City Council members wake up, read and listen to the wisdom of our citizens?

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Cresean Sterne 1 year, 9 months ago

Wrapping a resort town around tourism is the correct things to do which includes upgrading and developing specific things that make sense for the community and the people who visit as a whole. Curb appeal and safety should be a huge part of that attraction. It would be nice to see things like the east entrance of town get some life with median work and land scaping between the highway. You pass the welcome to Stmbt sign but it doesnt seem very welcoming untill you drop down into town above old fish creek. This has sat barren and ugly for way to long. A bike tunnel accessing village dr and hwy 40 would be nice as well. I have seen way to many tourists with kids trying to cross 40 by the fire house. The path takes you to the highway but forces you to fight the traffic to cross. It's only time before someone gets hit or killed. Sidewalk and curb repair especially between town and mountain. More and more people are using the walkway along 40 instead of dropping down to the core trail. I have seen many times a family with kids riding ther bikes west against traffic right next to the highway to get to town or to access the core trail. There is no sidewalk on that side of the highway and the traffic does 45. I have seen some close calls.DANGEROUS!!! Simple bus shelters would be nice to invest in needed areas around town. ( Hwy 40 corridore between town and mountain and west of town to 7/11. There is no reason to spend the kind of money that was spent on the shelters down town. Simple and functional. Maybe let the Stmbt school kids paint them to add some community charm like on the city bus. There is so much more to Steamboat then down town or the ski area. (Oh yah..Ski Time Sq.?? Arghh...Buisness's are struggling so much up there). These are the high volume areas but Steamboat offers beauty where ever you go. The city should embrace that more and spread it to areas that could realy use it. (howlesen tennis courts could use major repair). When you enter a town like this and it catches your eye all the way through that would be the kind of attraction, advertisement and investment that Stmbt should focus on. I am not against making yampa st more functional in the future but would like to see our funds spent better as a whole. NOT JUST FOCUSED IN ONE AREA

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Scott Wedel 1 year, 9 months ago

As for what BAP wants, adding a real estate asset at half of current market value is what any business would want.

Because SB will continue to need it as a fire station for a while then SB is planning on leasing it back so it is that much more of a sweetheart deal. BAP gets to buy the building at a sweetheart price and generate positive cash flows by leasing it back to the city.

Deal is even better for BAP because SB has only requested a short lease for the fire department so if construction of new fire station is delayed then BAP can complain about how that caused problems and thus increase the rent charged to the city. BAP could end up never moving in and instead selling it when fire dept finally moves out.

BAP makes good products, but nothing that doesn't face competition. Thus, the owners cannot reasonably expect to become a major national corporation, but instead would hope to sell out at some point. So the more assets on the balance sheet the better. Irony of this deal is that it makes BAP more attractive to a potential buyer and thus makes a buyout likely to happen sooner rather than later.

In terms of revitalizing Yampa St, I've never understood why BAP offices are supposed to be so radically better for the street than offices for police and fire. A little BAP store will have promotional value, but BAP products are sold around town and they'd cannibalize those sales and antagonize their retail partners if it was to be a factory outlet store selling at a deep discount. So that should not be expected.

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Amy Harris 1 year, 9 months ago

obviously our city council has not learned its lesson. it continues to make irresponsible economic decisions that impact us for years. this "deal" has to be stopped.

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Bob Smith 1 year, 9 months ago

follow the $$$...who stands to profit if this shady deal(s) goes through??

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Scott Wedel 1 year, 9 months ago

Hnsvark: We have NO idea of the infrastructure needs to complete an integrated plan. It could be $3mm; it could be $100mm. It’s a totally new city requirement and should not be expected to be accommodated from our general fund revenues

Who elected her Dictator of SB? An unelected bureaucrat gets to decide that it should not be paid from the general fund and City should seek a way to impose taxes that don't need voter approvals? That decision is made by a bureaucrat before she does her job of determining the likely costs of what is required for storm water drains? A finance director that admits costs could range from $3M to $100M is also implying the finance director is inept by failing to get specific estimates of that needed project. Storm drains are common enough so there is no reason that there is not a good estimate of their cost.

Though, this is a great argument to deny the sale of the public services building to BAP. City Finance Director states that City has storm water drain obligations that could cost up to $100M. With that possibility then it is simply impossible to sell city property at a deep discount and deplete the Town's budget reserves on new police and fire stations.

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mark hartless 1 year, 9 months ago

"...it is simply impossible to sell city property at a deep discount and deplete the town's budget reserves..."

Wanna bet??

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Scott Wedel 1 year, 9 months ago

Mark, Okay, you win that one.

With that possibility then it is simply IRRESPONSIBLE to sell city property at a deep discount and deplete the Town's budget reserves on new police and fire stations.

Irresponsible government is certainly not impossible.

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jerry carlton 1 year, 9 months ago

Irresponsible government is the not so new normal at all levels.

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Mike Isaac 1 year, 9 months ago

Cronyism is the the American Way, the people with money get sweetheart deals and little guy grabs his ankles. Sounds like Corporate Welfare. But you have to give the city credit for picking winners. Obama gave that Solar outfit in California $500 Million and they went under (Solyndra) and the same thing happen to some other energy outfits in Denver. At least BAP Honey Stinger and Big Agnes sell good products that people want to buy unlike Solyndra. BAP makes their stuff here in Routt county not overseas. Routt county coal can produce Electricity at 1/10 th the cost of California made solar panels. Seems to me we do a lot of things better than they do out west. And our public servants at City Hall are much smarter than that crew in DC

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rhys jones 1 year, 9 months ago

BAP makes a lot of -- if not all -- their stuff in China. Had a roommate who was on contract to fix it for them.

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Scott Wedel 1 year, 9 months ago

Mike, As a general rule, when a business starts looking for government handouts then the company is in trouble.

Strong companies are looking to get things done and their interactions with government is more along the lines of trying to get things approved quickly enough for their business needs (ie rancher building a road before drilling permit approved). Or Apple, Google and Salesforce.com only seeking fairly quick permitting process for their new buildings, not aid.

But a company like Solyndra starts looking for government help because other private investors don't like their prospects and won't invest. Or like Curt Schilling's video game company that got aid in Boston and then moved to another state that offered more money and finally went bankrupt earlier this year.

It is actually an invest theory that works better than randomly picking stocks. Not that most getting government assistance go bankrupt, but they are more often slow or no growth companies willing to deal with government to grind out a few dollars.

Since the public service building is to be rented back to the fire dept and apparently they and the city manager talked about the sale back in March. How fast does that company expect to grow or how unimportant is a combined HQ if they are willing to move this slowly and then wait for fire dept to leave?

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mark hartless 1 year, 9 months ago

"irresponsible government is certainly not impossible." There is hope for you yet, Wedel

I see Mike Isaac's point but Scott's comment is, I think, stronger. If companies were doing well and being left alone I think most would likely want to retain that status rather than set their sights on trying to get ahead down at the courthouse. Most, if profitablle, want little or nothing to do with government favors or sweetheart deals. It screws with their autonomy, and that's a big deal. It's usually those with bad looking books, products, ideas, etc that come crying for help.

Also, municipalities with crappy looking books and poor management can be improprerly influenced by such companies. Not saying that is the case here... not at all, but communities rarely win when their local government becomes too weak to resist such influence.

That's why smart citizens don't let their municipal governments get into weak financial positions where they become susceptible to that kind of influence from profitable or unprofitable businesses.

Smart citizens don't fall for or allow their municipal government to play shell games about where money is comming from or going to.

They don't accept ridiculous assertions about how a "general fund" is different from a "recreation fund" is different from a "housing program" is different from an "airline fund" is different from "infrastructure funds". That's all BULL. It's taxpayer's dollars comming in and taxpayer's dollars going out... period.

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