Base area bonds delayed in Steamboat
Final stage of base area improvements confront conservative lenders
February 21, 2010
Steamboat Springs — Faced with a tighter lending market, city officials and members of the Urban Renewal Authority Advisory Committee have agreed to delay issuing bonded indebtedness needed to cover the third and final year of building the promenade and daylighting Burgess Creek at the base of the ski area.
Construction will continue this summer, but city officials and community leaders planning the project are likely to be confronted with a difficult set of decisions this spring. If they know there's a strong likelihood they won't be able to finish the project by fall 2011, what portion of the work will leave the community with a desirable product until the third phase of the work can be completed?
Base Area Redevelopment Coordinator Joe Kracum told the Steamboat Springs City Council on Tuesday night that the group is determined to fully complete whatever construction it tackles this summer to leave the public with an attractive, usable facility. He added that he would ask contractors to bid for the entire two-year project so costs are fixed in case other funding options become available.
The contract documents reflect that it's likely only the first summer of work will be funded and that prospective contractors will be made aware of that.
Kracum recently told URAAC members that early construction estimates are $9 million and that there may be a total of $4.6 million available with only $3.6 million of that available for actual construction.
"We could build half of the promenade and daylight half of the creek this summer, or we could build all of one or the other," URAAC Co-Chairman David Baldinger Jr. said. "In this cycle, to get everything we ever wanted could cost us another year or two."
Kracum told the council that a likely scenario would be to build the promenade from the east side of Slopeside Grill, continuing past Torian Plum Plaza to a sweeping curve that would flow down the hill until it reached the area in front of Sheraton Steamboat Resort. Work needed to daylight the creek that far also is possible. A series of ponds planned along the creek already are designed to have take-out valves that would return the stream flow to its culvert in winter, Kracum said. That would create a natural spot to suspend the daylighting of the creek in the next construction phase.
Baldinger said he remained optimistic that URAAC could obtain another advance from the city and keep the project going.
"It was kind of a shock, but I think we're already over it and have a game plan. We're going to plan really conservatively," he said.
City Manager Jon Roberts said the city would have to conduct a risk analysis in the same way that banks do and consider among other things the limits an advance would impose on its ability to borrow money for other needs before extending further funds from its reserves.
The city, acting as the Steamboat Springs Redevelopment Authority, can capture property tax revenues attributable to growth in property valuations within a boundary line near the base of the ski area to fund public improvements meant to stimulate further investment by the private sector. The method of raising funds is called tax increment financing.
The SSRA has issued a series of bonds backed by the property tax revenues to borrow the money to build the improvements. Previous bonded indebtedness of $9 million built a pair of traffic roundabouts at the base area as well as other improvements.
A second round of $16.5 million helped URAAC, the citizens committee reporting to the SSRA, to do extensive infrastructure and planning work last summer, including a new water diversion facility preparatory to bring Burgess Creek out of an old culvert where it crosses the lowest ski trails. Of the $16.5 million, $8.5 million was used to pay off the original bonds, and $2.6 million was used to repay an advance from city reserves needed to keep the project going. Last summer's work cost about $5 million. A large stone seating area and fireplace pit representing the beginnings of attractive new pedestrian areas also were built last summer.
Roberts said Thursday that the city and URAAC members had planned conservatively on an upcoming bond issue to fund the next two years of construction on public improvements at the base of the ski area. They understood that variables in the financial markets could affect the redevelopment authority's ability to leverage debt and performed a risk analysis, and they expected to borrow another $9 million.
They worked with an expert consultant who helped them plan for the likelihood that the overall assessed valuation of private property at the base of the ski area could reduce their ability to borrow.
But the conservative outlook of banks has made officials rethink going forward this year with borrowing the money needed for the full two years of construction remaining.
Initially, Steamboat officials were working with Wells Fargo Bank and U.S. Bank on lines of credit that would funnel money from bond proceeds into the SSRA's accounts.
The banks don't actually loan the money, city Finance Director Deb Hinsvark said.
"They stand between us and the bond holders to guarantee the funds will be available," Hinsvark said.
However, Wells Fargo dropped out of the discussions, and the U.S. Bank raised the threshold of the amount of funds the city would have to leverage in order to generate the revenues it sought.
The bank told the city it would have to borrow an additional 30 percent beyond what it had planned, and that amount would be set aside and held by the bank until it decided whether to release the monies for construction in summer 2011.
"The banks want to put a clamp on your money," Hinsvark said.
Roberts said he told URAAC members he preferred to wait on borrowing the money to fund the third and final year of construction in 2011 in case lending terms loosen up.
"Why borrow the money and pay the interest on it if the bank reserves the right not to release it for the third year" of construction? he asked.