Steamboat City Council postpones resolution on Fish Creek Mobile Home Park debt
May 21, 2014
Steamboat Springs — Securing the funds to complete needed water and sewer upgrades at Fish Creek Mobile Home Park means the Yampa Valley Housing Authority must restructure the debt it took on during its 2007 purchase of the park.
In addition to a $2.58 million loan from Wells Fargo, YVHA also took on a $954,000 loan from the city of Steamboat Springs.
YVHA already has brought Alpine Bank to the table to cover the debt to Wells Fargo, but it also must get the city to sign off on a deal that would factor in a new, third agency: the Colorado Water Resources and Power Development Authority.
On Tuesday night, the City Council discussed the nature of the new deal and ended up postponing a resolution authorizing the agreement until the June 3 meeting, contingent on some clarifications.
The income level of the residents at Fish Creek Mobile Home Park qualifies it for a zero percent interest loan from the state agency to complete the water and sewer project. There also is the potential for some principal forgiveness when those determinations are made in a couple of months.
What the agency requires in return is a commitment of some of the rents from the park, which were committed entirely to Wells Fargo in the original deal. The city's original mortgage on the park was second to Wells Fargo and had no committed lot rents.
"I can see the looks of skepticism like, 'What a terrible business deal,'" City Attorney Tony Lettunich said to members of the City Council. "But this was never intended to be a good business deal. This was intended to be vehicle to permit the survival of the Fish Creek Mobile Home Park and to allow the housing authority to step in and coordinate its continued existence."
YVHA now is asking the city to push the payment schedule out about 27 years and forgive most of the interest that would have accrued during the course of the original loan.
About $30,000 in interest that already has accrued would be added to the principal, which now stands at almost $791,000. The new loan would be capped at $1 million.
YVHA Board President Kathi Meyer said Wednesday that the organization looked at the overall structure of the park's debts and income — taking into account the new zero percent interest loan — to ensure that it could afford to pay everyone.
Lettunich assured the City Council that the parties to the deal and consulted bond counsel were confident the proposed agreement complied with TABOR restrictions, as the park is an enterprise fund.
The new deal would keep the city's mortgage on the park in second position behind the larger bank loan (Alpine Bank in this case) and would put it behind the state agency for lot rents, which again, it was never entitled to before.
"The water and power authority is not doing this with no security," YVHA counsel Bob Weiss said. "At least with respect to the assignment of rents, (the city) is in a subordinate position to both entities as proposed. Otherwise, this new lender is not going to lend the money."
"We are unsecured, but we were unsecured to begin with," City Manager Deb Hinsvark said about the city's position in the deal.
"We were looking at compounding interest that was going to make the loan impossible to ever repay," she said. "Our goal was to get some funds back into the housing fund for future housing."
The dollars that the city initially loaned for the purchase of the park are almost a sunk cost, City Council President Bart Kounovsky said.
"And we're doing the best that we can to allow this to continue to operate and serve the needs of our citizens out there while still allowing us an opportunity to put those dollars back into that fund," he said. "The work that's been done here is some very good work to try to get the best out of a real tough situation."