Friday, November 9, 2007

New Council Mulls Iron Horse

New City Council Members mull Iron Horse - New councilors face challenges
By Brandon Gee

Steamboat Springs — Steamboat Springs’ planned $4.05 million purchase of the Iron Horse Inn was a controversial topic leading up to Election Day. And now that the deal has closed, the incoming City Council will be hard-pressed to reverse the transaction.
The Iron Horse Inn purchase received unanimous approval from the current City Council and has been embraced by city staff. The city intends to use it to provide affordable rental housing for city employees and others. However, the purchase was heavily criticized by City Council candidates in recent months. That criticism included the final taxpayer price tag of more than $10 million, when interest is included.

Scott Myller, who defeated City Council President Susan Dellinger on Tuesday, said he may have looked to back out of the purchase of the motel just outside of downtown.
“It’s in direct competition with the private sector’s ability to provide rental housing,” Myller said. “It makes them throw up their arms and not even try if the city’s going to subsidize it. … Now that it’s closed, I guess we’ll have to deal with it. I’m the type of person that once a decision is made, I’m ready to move on.” The city closed on the transaction Oct. 31.

Jon Quinn, who defeated Councilmember Karen Post on Tuesday, also disagrees with the purchase, but suggested the city might be able to back out prior to the 2008 budget taking effect in January. Because the Iron Horse Inn purchase is structured as a “lease purchase,” City Attorney Tony Lettunich confirmed that it’s subject to annual appropriations and could be canceled. But Lettunich said such a move would be foolish.

The city is using certificates of participation to fund the transaction and has established the Steamboat Springs Build­ing Corp. as an intermediary bet­ween the city and the certificate of participation holders. Lettunich said if the city does not appropriate funds related to the inn’s purchase, it would default on its payment to the Building Corp., which would in turn be unable to pay the holders of the certificates of participation, leading to a foreclosure on the property.
“If the city does that, it would be catastrophic for our bonding ability,” Lettunich said. “The bond market would not think very highly of Steamboat Springs. We legally have the right to do that, but there would be grave consequences.” Quinn also raised the possibility of selling the Iron Horse Inn in the near future. He thinks the city has underestimated renovation costs and suggested not remodeling the inn and using it only in the short term while looking to sell it for a profit. “It’s something I would consider, at least in the next five years,” Quinn said. “I think we can do better than that particular piece of property. It’s possible that the city could actually make a dime on it. … If there’s a way that it can help in the near run, fantastic, but maybe we don’t put so much money in the remodel and look to flip it.”

Lettunich, however, said a sale also would be problematic. It is the certificate of participation holders, not the city, that technically own the inn. That won’t change until the certificates are paid off in 20 to 25 years. Current council members and city staff say the Oct. 31 closing date was in no way influenced by the upcoming Election Day.

“It was completely unrelated. I can absolutely guarantee you there was no attention paid to the election,” Lettunich said. Dellinger agreed. “The closing was all specific to the seller, as every closing is,” she said. “It had nothing to do with the election.” Lettunich noted that before the purchase and sale agreement was assigned to the city, the original contract closing date was Sept. 6. Cafritz Interests of Washington, D.C. — purchasers of Ski Time Square and Thunderhead Lodge — had originally planned to purchase the inn and use it to satisfy its affordable housing requirements for the redevelopment of its base area properties.
Once the purchase and sale agreement were assigned to the city, Lettunich said the city chose the earliest possible closing date to keep the seller interested. Lettunich said Oct. 31 was chosen because it gave the city enough time to approve the purchase through city ordinances with 30 days following the passage of those ordinances.

Not all new City Council members oppose the Iron Horse Inn purchase. Walter Magill, who defeated Vince Arroyo for a District 3 seat, said he thought it was a good purchase presented poorly. Meg Bentley, who defeated former City Manager Paul Hughes for a District 2 seat, said she was “thrilled that it closed.” Even Quinn said he isn’t prepared to make any decisions regarding the inn. “It’s something that’s going to take some attention,” he said. “I’d like to learn more about it before telling you I’m going to go left or right.”

Cari Hermacinski, who defeated Councilmember Tow­ny Anderson in the at-large race, said the purchase is on a list of things she plans to learn more about from city staff before forming an opinion. City Manager Alan Lanning agreed with Lettunich that the deal would be hard to reverse, but said he will be happy to explain why city staff thinks it is a good move for the city.
“It’s pretty hard to back it up at this point,” Lanning said. “If they ask, we’ll explain why we think it’s a good deal, and if they disagree, then they disagree.”