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Iron Horse could be sold Tuesday

The Iron Horse Inn has been eyed by affordable housing developers and
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— It was a lifesaver for bus drivers, City Market employees, hospital workers, a former city manager and a public works director when affordable housing was nearly impossible to find in Steamboat Springs in 2007 and 2008.

Today, it’s been a lifesaver for seasonal employees at the Sheraton Steamboat Resort and dozens of other local workers.

In the middle, the city’s Iron Horse Inn has been called an “albatross” around the city’s neck.



It was briefly eyed as the new site of a new police station.

And it’s been the subject of many debates and philosophical discussions at Steamboat Springs City Council meetings.



Now, just as the property is again being used in the way a previous city council intended it to be used, the current city council has a decision to make.

Should the city itself be in the business of providing affordable housing for its employees and other local workers?

A city council in 2007 felt unanimously it was a responsibility the city should take on.

In contrast, the current council is poised to say ‘no’ and divest itself of a property on which the city still owes considerable debt.

On Tuesday night, council members will decide whether to sell the Iron Horse for $3.05 million to a pair of buyers who say they will renovate it and maintain it as workforce housing.

How did the council get to the point of wanting to sell the property for $3.05 million — and at a loss — to a pair of buyers who say they will renovate it and maintain it as workforce housing?

Good intentions

The city purchased the Iron Horse in 2007 for $4.05 million and took on an additional $1 million in debt to renovate the hotel building on the property into rental apartments.

The city funded its purchase of the Iron Horse by issuing certificates of participation in the amount of $5.2 million, with an average interest rate of 6.48 percent.

The financing term was 25 years.

“We had the best intentions,” former City Councilman Steve Ivancie said of the purchase, noting the decision was made unanimously and after much study of affordable housing issues.

A new city council in 2008 abandoned the $1 million renovation plan after city staff estimated the property would lose $667,174 over a 10-year period if the hotel were redeveloped into apartments.

The $1 million was instead used to pay down the debt on the property, a debt that still totals more than $4 million today.

Without the renovations, the city estimated it would net a profit of $177,771 over 10 years if the hotel portion remained open.

The city council that bought the property thought it would be worth subsidizing if it were redeveloped into affordable housing.

The new council wanted to limit financial losses.

“The next council came along and had other ideas,” Ivancie said Friday. “They took money we had intended for rehabilitation for the property and put it elsewhere, and therefore, they just didn’t take care of it. They didn’t take care of the investment, and you have what you have right now.”

The city used one of the buildings as long-term rentals and continued operating the hotel portion until 2012.

The city closed the hotel that year, because expenses exceeded revenue by a margin of nearly $40,000.

But more recently, the former hotel property was fully utilized as affordable workforce housing when the Sheraton Steamboat Resort leased the entire hotel portion of the building as a dormitory for its seasonal employees.

Under the most recent configuration, city officials said the property ran about even in operating costs, but that didn’t include the more than $400,000 in debt service the city must pay on the property each year.

All the rooms are currently in high demand, but the property is in need of significant capital repairs in the future.

Big decision

The future of the Iron Horse is poised to become part of the legacy of the current city council.

In recent letters to the editor published by Steamboat Today, some community members have urged City Council to take a pause and have more public dialogue before deciding whether to sell the hotel.

Hope Cook said she wants the council to discuss why it is selling the hotel at a million-plus-dollar loss when the economy and commercial property values are improving.

She asked the council to allow more time for the public to give more input on the sale.

So far, City Council has not publicly discussed the merits of the sale and how it chose the proposal from Ski Town Commercial over seven other proposals the city received.

City staff has said the proposal Council is considering came with the highest bid.

A records request from Steamboat Today to review all the proposals considered was denied, and the council is keeping them private until it has closed on the deal with Ski Town Commercial.

Council members fear releasing the other proposals could negatively impact the sale or cause Ski Town Commercial to lower its bid if it sees what the other bids were.

Council President Bart Kounovsky told Steamboat Today earlier this month he liked the price and a $400,000 escrow the buyers have included in their purchase price that would be used on public improvements on and around the property.

He also said it would be good for the city to get out of the workforce housing business, a business he doesn’t think the city should be in.

The council voted, 5-1, earlier this month to approve the first reading of the sale without discussion or questions to city staff.

Councilwoman Sonja Macys was the lone “no” vote.

Macys said she wasn’t certain the Ski Town Commercial proposal represented the best use of the Iron Horse, and she was concerned the contract does not bind the buyers to follow through with their stated plan for the property.

City Council will consider the Iron Horse sale after a public hearing Tuesday night in Citizens Hall.

To reach Scott Franz, call 970-871-4210, email scottfranz@SteamboatToday.com or follow him on Twitter @ScottFranz10


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