Scott Wedel: Time to dissolve Yampa Valley Housing Authority


I am very interested in the troubles of the Yampa Valley Housing Authority. I think affordable housing is an important issue that directly impacts local people’s lives. I attended the YVHA board meeting Thursday.

YVHA can claim a couple of successful projects before the Great Recession. YVHA’s policy was to have ongoing development projects. If it had been able to receive financing in early 2008, then it would have been in the middle of a $32 million development project when the recession hit locally later in 2008. The consequences of that would have been immediate and would have bankrupted YVHA.

YVHA has been in shambles for years. Its website lacks agendas and meeting minutes for 2013, 2012, 2011 and 2009, its current budget and its current annual report. From the minutes that are available, the agency has been fighting its computerized billing system since YVHA was created. Problems with incompatibilities with its multiple accounting systems were cited in 2012 by then-Executive Director George Krawzoff, causing him to think there were ongoing financial issues before he was fired.

YVHA’s current financial situation is that Hillside Apartments is run on a break-even basis and is financially sound. Fish Creek Mobile Home Park is run on a break-even basis but has an unfunded $1.5 million infrastructure repair project. YVHA’s Development Enterprise owes more than $100,000 for two Sierra View lots that are worth less than half of their purchase price. YVHA’s Development Enterprise owes more than $2 million for the Elk River parcel. YVHA cannot afford the interest payments on that Elk River parcel.

There appears to be no doubt that YVHA could allow the Elk River parcel to be foreclosed. First National Bank of the Rockies could ask YVHA to pay any losses, but because YVHA is a government body, there is no way for the bank to collect that balance.

If the parcel is foreclosed, then there is no future for YVHA. There would be no property to develop, and it would have a negative credit rating and insufficient cash flow from other properties to start a development project. Thus, last fall, it asked for legal advice from a Denver law firm that specializes in municipal debt issues. YVHA received that legal advice Nov. 16.

That legal advice presents a legal theory that YVHA could be allowed to purchase the Elk River lots for current value. The legal advice also presents some troubles for YVHA because it calls into question the validity of all of YVHA’s debt on other properties. From the Denver legal counsel’s letter:

“First, the Loan secured by the Deed of Trust constitutes debt and was entered into without advance voter approval as required by the Colorado Constitution.

"Second, the Loan constitutes a multiple fiscal year financial obligation and was entered into without an election as required by TABOR.

"Third, there is no express statutory authority for a multijurisdictional housing authority to mortgage or otherwise encumber property.

"For these three independent reasons, it is our opinion that the Loan, secured by the Deed of Trust, is invalid and therefore unenforceable.”

All of YVHA’s properties have debts that never were approved by local taxpayers. The YVHA board ignored its own legal opinion for its other properties and applied it only to the Elk River parcel. More than $1 million has been spent by YVHA on debt service after it received legal advice stating its debt agreements were invalid.

In May, the YVHA board decided it would stop making loan payments to First National Bank of the Rockies for the Elk River loan. YVHA released a letter to the Steamboat Springs City Council and the Routt County Board of Commissioners stating, “Unfortunately, although as YVHA has approached these discussion in good faith, FNBR has been unwilling to consider YVHA’s restructuring proposals.” YVHA’s letter mentions numerous times its desire to negotiate and the bank’s unwillingness to listen.

But YVHA received a letter from Peter Waller, chairman, president and CEO of First National Bank of the Rockies, that states:

“So far our negotiations have been such that the authority wants the Bank to take a huge loss on our loan and the authority retain all the upside assuming that the value of the property will recover over time, and history indicates that will be the case. Such a proposition is unacceptable to the Bank.

“As I expressed to you in our last meeting, the Bank is willing to work with the authority in a manner that is mutually beneficial. The Bank can provide terms through a new lease/purchase arrangement (subject to a non-objection by our regulator) that may decrease the authority’s monthly debt service. We are not in a position to incur loss of principal. Why would the Bank incur all of the temporary loss in value and give the authority all of the upside for future increases in value? That simply is unacceptable.”

Thus, Waller’s letter clearly states he has considered YVHA’s restructuring proposals and states why they have been rejected. First National Bank of the Rockies has negotiated and considered YVHA’s proposals. It has rejected them. To gain public support in its negotiations with the bank, YVHA now has taken to misleading the Steamboat Springs City Council, the Routt County commissioners and the public regarding the real state of negotiations with First National Bank of the Rockies.

The disaster that is YVHA is complete. It is administratively incompetent, has incompetent business practices, ignores its own legal advice and misleads the public.

YVHA should be dissolved as a government authority. Hillside Apartments and Fish Creek Mobile Home Park should be transferred to a nonprofit. YVHA is an argument against local government affordable housing efforts. No longer would the city of Steamboat and Routt County give so much money for a good purpose to receive so little in return.


Bob Smith 3 years, 10 months ago

"So far our negotiations have been such that the authority wants the Bank to take a huge loss on our loan and the authority retain all the upside assuming that the value of the property will recover over time, and history indicates that will be the case. Such a proposition is unacceptable to the Bank." don't say?! COMEDY


John Fielding 3 years, 10 months ago


It is unfortunate for the current directors that they have to deal with the consequences of a terrible decision by their predecessors. If the YVHA survives this ordeal it is important that a procedure be in place that to review potential projects for fatal flaws.

At this point in the agency's evolution, it seems destined to be discontinued if not significantly reconfigured. Any effort to restore it to functionality must have at its core a comprehensive cost/benefit analysis. How many people have been helped, to what extent, and at what cost to whom? This ties in closely with the current review of the fees charged to developers for affordable housing. That cost is passed on to the buyers so a small number of people pay a large amount to subsidize these efforts.

Having spent many years in development of low cost housing in the private sector, I can speak from experience about how it can be done effectively. I believe the analysis would prove that the multi unit complexes we created provided more benefit to the buyers and less burden to the public by far. The owners of the development firm reaped modest profits for their investment (mostly paid to the banks) and hard work. Support from municipalities came in the form of deferred taxes and fees, thus lowering the up front investment and interest costs. Ultimately there was significant increase in revenues to the municipality from property taxes and the other contributions of productive new residents.

It is worth a hard look at ways to promote the private development of lower cost housing.



Scott Wedel 3 years, 10 months ago


I am not suggesting that YVHA's housing units be sold to a private buyer that would be expected to raise rents to market rents. Their properties should be transferred to a nonprofit like RALF II.

The only reason for YVHA to exist as a government agency is for the ability to collect taxes. YVHA has been too inept for too long to ever hope to get a tax increase approved by the public. Even during the peak of housing in 2007, their survey indicated a tax measure would fail.

the nonprofit RALF was able to acquire Hillside Apts and operate it effectively. Their accounting system worked fine and so on. They were competent. No reason that it could not be recreated to own and managed Hillside Apts again and maybe Fish Creek MHP.

It was the misguided fantasy of YVHA to development affordable housing and get approval for taxes to accelerate their efforts. YVHA in first half of 2008 has nothing on the record showing that they realized the national economy was in recession and they should change their policies. The only reason they did not proceed with the $32m Elk River project is because they couldn't get financing. That version of history was confirmed in the June YVHA meeting when they reviewed how they got to the current situation.

The fundamental truth is that a government authority is not in a good position to be developing property because it cannot cope with downturns. A private developer will have often limited their risks by having investors. And if a private developer can always go bankrupt if overly exposed to risk. A government authority cannot easily offload risks. Whenever there is an economic downturn then any government authority doing housing projects will have to absorb major losses.

A nonprofit often has an advantage over the private sector in their ability to get financing and to get grants. So, a nonprofit can buy existing properties with good cash flows at market prices and still provide affordable housing. The nonprofit doesn't need as much cashflow as the private investor and so is able to keep rents lower.

And the private sector does respond to market forces and there are at least two apartment buildings recently approved for construction in SB.

Thus, a model of having a local nonprofit willing and able to buy good cashflow properties could work with private developers that build and establish rental properties.

The worst part of YVHA's development model is that a better run affordable housing agency focused on cash flow could have bought a ton of properties with good cashflow during the recent recession.


John Fielding 3 years, 10 months ago


My opinion is that no government funded entity should be in the development business, nor even in the ownership of rental units

If there are people who need money to make their rent, give them direct charity and leave the ownership to the landlords. As was noted herein, much of the rent collected by YVHA comes from HUD programs.

If there are landlords who cannot afford to maintain and upgrade their properties without raising rents, let them apply for assistance with the provision they hold down rents for a time in return. I worked with a HUD program that did much important work on aging urban housing stock in the 1980s, great improvements were made.

If there are developers who find the costs of meeting requirements for design standards, upfront utility costs, taxes on unsold units, affordable housing fees, and other government related expenditures are raising the prices of the finished units too high let these be deferred to the back end, reduced or waived entirely.

As far as disposition of YVHA's existing assets, if in fact they cannot be seized by the courts to pay other debt, they should be sold for their market value with a deed restriction that fixes the rates that may be charged at a fraction of the median income. If it is discovered no one will buy them with such restrictions, that would prove a permanent operating subsidy is required. In that case, let them go to market rate and give the subsidy to the renters themselves. Any amount received above the debt on the property should be used to pay other debt or return to the taxpayers from whence it came.



Scott Wedel 3 years, 10 months ago


Routt County is a good place for HUD assisted tenants. The program provides assistance based upon average rent for the county. Thus, in Routt County the average is pulled up by Steamboat so a person on assistance can get a nice apartment in Hayden or Oak Creek. I would argue that the objective of providing affordable housing within Steamboat city limits is workforce housing over government assisted housing.

I think it is highly doubtful that YVHA's Elk River or Sierra View assets cannot be foreclosed upon. The cases cited in the letter from their lawyer had become complicated with improvements paid by taxpayers. So foreclosing and returning the property to a debt holder would have unduly enriched them and hurt the taxpayers. Thus, courts used other remedies in those cases. But Elk River and Sierra View lots are unimproved land and there is nothing unfair about foreclosing.

The lack of legal authority to have the debt and be making payments on the debt would seem to be more of a potential issue for taxpayers having their money spent without legal authority.

I believe there would be little problem finding a nonprofit that would be willing to accept Hillside Apts and FCMHP. A better run nonprofit would have lower administrative costs and could raise rents to still be affordable for workforce housing in order to generate income needed to address critical infrastructure repairs at FCMHP and maybe qualify for some grants. After their current properties are in order then they could look to add additional cash flow properties.


Bob Schneider 3 years, 10 months ago

The long and short of this fiasco is [1] the YVHA 's budget is not large enough to "buy", in the form of a director, the expertise necessary to be successful in the real estate development business and [2] absent that ability they are only suited for management and rent collecting and [3] so far as I know, none of the board members has that expertise either. Scott: you are right. Stop before they strike again.


Scott Wedel 3 years, 10 months ago


It is not merely a matter of not being able to afford good enough expertise. It is the very nature of development that is a bad fit with a government housing authority.

I remember that some county's housing authority was in crisis in Northern California after a downturn in the 80s. They created an expert commission including representatives from major development companies. Their conclusions were that development is a risky business. That real estate markets tend to have sharp downturns that are difficult to predict. That any development project has a period of time where money is committed and vulnerable if there is a decline in the real estate market.

The private developers decide how much risk they are willing to accept. They offload the risks by having investors and forming limited liability companies for each project. Those options are not available to government authorities.

Thus, the conclusion of the expert commission was that government agencies doing development projects will soon enough have a badly timed project that loses a lot of money. Unless the government agency can accept major losses without it impacting their other activities then they cannot afford to be in the development business.


John St Pierre 3 years, 10 months ago

The Pilot has yet to tell us who the current board members are since the YVHA website seems to be quite dated in its information...... and what the board memebers reaction to all the press has been


Scott Wedel 3 years, 10 months ago


YVHA has recently updated their list of board members to be current. A few weeks ago it was wrong, but it is correct now.

Still no recent agendas or minutes.


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