|
"Land Banking" - buying up land and property with public housing funds became a key strategy promoted at the meeting. (Admittedly, before the Burlingame money pit was uncovered.) Several "deposits" in the City's "Land Bank" have caught the public's ire, as they were not only controversial when they occurred, but have now become high-profile money losers, and further call into question City Officials' fiscal management. While playing fast and loose with the public's money, Mayor Ireland and City Manager Steve Barwick surely rue the days that they signed off on the purchase(s) of these non-performing assets:
THE "COP HOUSE" - 802 W. MAIN STREET
On August 15, 2007, the City purchased a rundown single-family house at the corner of 8th and Main, just along the west side of the S-Curves. This 1400 square foot, 2-bedroom, 1-bath addition to our Land Bank cost the taxpayers $3.69 million in RETT funds. The City's intent was to tear the house down in order to develop a 9100 square foot 10-unit affordable housing complex, with a mix of 1, 2 and 3-bedroom units (18 bedrooms in all) on the 9000 square foot site. The City planned to spend a total of $7.5 million for building 10 units, and subsidize the units for about $490,000 EACH. Estimated taxpayer subsidy was to total $4.9 million.
So just where is this affordable housing dream today? The dream remains just that -- a dream. And for the decision makers, it's presumably a bad dream. The $3.7 million 802 W. Main Street brings in $1500 per month in rental income. (The Red Ant affectionately refers to 802 W. Main as "the cop house" because finally, many months after taking possession, the City rented this Land Bank gem (troubled asset?) to a City of Aspen Policeman after investing just over $7000 in improvements to the property. The "cop" no longer lives there, rather, a long-time APCHA-approved working local currently calls "the cop house" home.)
The Housing Fund is currently out of money and in debt. While the City gets $1500 per month on a $3.7 million house, with no development in the foreseeable future, one wonders how many employees we might have helped with their near-term housing needs with a just fraction of these funds.
BMC WEST
In December 2007 the city closed on a 4.6-acre lumberyard just east of the Aspen Airport Business Center for $18.25 million. In its zeal to acquire the property, for a future affordable housing development, the City did not take the time to get an appraisal for fear that another buyer would move in quickly, although this was quite improbable considering the very restrictive zoning there. Yes, it's true - the City did not get an appraisal on an $18.25 million purchase, despite protests from some citizens at the time! But rest assured, taxpayers, the City maintains that this was a "reasonable" price - after all, the BMC West land is perhaps the largest POTENTIALLY developable parcel that remains in the upper Roaring Fork Valley, and adjoined some undeveloped City property.
In the summer of 2008, City Manager Steve Barwick finally engaged an appraiser to conduct a valuation on the parcel, but when a yet-to-be-publically-disclosed draft was delivered, the City asked the appraiser to "revise the scope." Another appraisal is reportedly in the works that includes an adjacent 3-acre parcel of City-owned land. The new appraisal will also address zoning restrictions on the BMC West land. (Zoning restrictions on OUR $18.25 million property that was purchased with great haste and no appraisal?? Could this mean that the BMC prize in our Land Bank portfolio might, as critics warned before the deal was closed, have zoning restrictions obviating its intended affordable housing development use??) Good grief!
Since October 2008, The Red Ant, through the Colorado Open Records Act, has repeatedly requested the BMC appraisal. Nothing has been provided other than Barwick's assurance that the new appraisal will be ready in "early 2009." We have additionally requested the City's agreement with the appraiser, all correspondence that includes the reason for the delay in submitting/receiving the report, and all correspondence that discusses the valuation of the property in advance of the report, but received no replies. In short, we expect a potential "distressed sale" of the BMC property, with the losses to be funded by yes, you guessed it -- the taxpayers. Call us cynics, but we don't expect to see that happen until after the upcoming election cycle.
Once again, the millions in lost value could have been used for subsidizing a lot of employees' rental expenses, helping them afford quality housing in the area. Remind us -- isn't that the idea of workforce housing?
JORDIE GERBERG'S HOUSE - 312 W. HYMAN AVE
When the sale of local Jordie Gerberg's house collapsed in 2006 because the contracted buyer discovered the house was quite questionably on "the list" for historic preservation, the City stepped in and bought the property from Gerberg for $3.5 million with dedicated housing funds from the RETT. The City's intent was to historically designate this mutant Chalet/Rancher and further develop the parcel to create four (4) deed-restricted affordable housing units on the property. (Think of the public subsidies on those four units!! Ouch! Nearly $1 million a piece!)  The Red Ant's favorite quote on this Land Banking deal comes from City Manager, Steve Barwick, "We're in the process of redefining what subsidies look like." In the end, the affordable housing development didn't happen, Gerberg currently rents his house back from the City for $3000/mo., and the City is contemplating both a controversial land-swap with a neighbor and a sell-back to Gerberg (at a loss) in order to unload the property. (For the complete story, look for, "One Deal Over the Cuckoo's Nest-Aspen Style," coming soon on www.TheRedAnt.com.)
NO NEW WORKFORCE HOUSING, ONLY MILLIONS OF TROUBLED ASSETS
After these questionable transactions and the financial fiasco of Burlingame Phase I there is little doubt that the City of Aspen's "Land Bank" will need a "bailout." Current leadership has bankrupted the formerly robust RETT-supplied Housing Fund and amassed a portfolio of non-performing real estate assets with money specifically designated for affordable housing. Never believing that the bubble would burst, Ireland and Barwick to this day continue their zeal for spending. Just look at the 2009 budget! Never mind, in the current economic environment there are surely many struggling local employees who could have been directly benefitting from these unrecoverable, squandered funds spent on premium priced land.
Despite Mayor Mick's reputation as the Valley's ardent affordable housing crusader, 20 months into his leadership, the government has executed virtually no new near-term housing facilities or subsidy programs, but instead recklessly used precious housing funds for unwise land speculation, rather than realistic programs which could have addressed immediate employee/employer needs. Were these the leadership decisions of a true housing advocate or those of a zealot, blinded by power and the City's wealth, with no concern for his fiscal stewardship responsibilities?
Please share your comments below.
Reminder--New Law
ALL homes in Aspen and Pitkin County must have CO detectors by March 2. See the new regulations at
http://theredant.squarespace.com/storage/Ptk_monoxide_cardFinal.pdf
|
February 13 
View Printer Friendly Version
Email Article to Friend
Reader Comments (21)
Yes, it's crazy. We need rental, not 1 million dollar subsidies.
This is what happens when you elect a former dishwasher to run a complex, multi-million dollar entity. Ireland and Barwick running the City of Aspen is like turning over Disneyland to Mickey and Minney. The question that comes to mind is which one of these two geniuses is Minnie?
Nice Red Ant. You certainly are not pulling any punches.
Bear in mind, although I need to double check my facts---the currently being considered "swap" (of the Jordie house) is more of the same. As you will recall, a multifamily complex cannot be replaced without 100% mitigation/replacement in the form of affordable housing.
Correspondingly, the value of these units as a tear down is severely impaired by these "replacement costs. Zoning/FAR likely would make on site replacement/100% mitigation impossible. From what I can guess, its value as a condo conversion is also pretty low given lousy "bones".
It's value as rental housing is simply income divided by an appropriate cap rate. What do you think? 4 units x $3,000 NNN (Jordie's "market" rent?) 7% or 8% cap? Might get you to $2.0 million would be pretty interesting to see an appraisal performed given these limitations.
Yes, which is a reminder that in the fall, Council promised to revisit those Ordinance 22 and related regulations very soon. They wanted to disavow those unfair and perverse effects to condo owners. But, they have not chosen to address this issue as promised.
My experience with subsidized housing has been similar to your housing follies. Due to outsourcing design to a non-snow climate firm, forced tightening of construction timelines on the builder and a compromised attempt at a green certification among other things, we received our C/O six months late. We have had and still are dealing with issues resulting from these constraints costing into the mid-six figures, not to mention serious living hazards.
Though The City has, to date, acknowledged responsibility for these issues, three years into our occupancy we still have multiple major issues yet to be resolved that have resulted in significant financial and physical liability to the owners that I fear may never been mitigated. It's a good program gone awry due, in part, to the lack of checks and balances. Eroding accountability in prosperous times, always seems to be much harder to place when the gig is up.
As I read this, it occurs to me that the much-maligned private residential developers have provided more affordable housing with their own funds in the last 2 years than the City has with taxpayer funds. Employees are living in those nice, new apartments, while the public funds for housing are being squandered, and housing no one.
" Were these the leadership decisions of a true housing advocate or those of a zealot, blinded by power and the City's wealth, with no concern for his fiscal stewardship responsibilities?"
Dastardly behavior, dastardly I say!
Good work, ladies!
The ANT covering land banking couldn't be more dead on. While the line between business and government is blurry, that is certainly an issue that could learn from good business sense and better management in government.
When will this disastrous era be brought to an end? Why do the citizens of Aspen sit by while the tax payer's money continues to get flushed down the toilet? Please people, get involved and lets all join forces to take back our local government! The non-stop waste and irresponsible spending is beyond intolerable. Any one for a coup? Thank again Ant.
I wonder the same thing, Rebecca.
Maybe this economic crises will cause us to focus, and realize that they will be running up debt that we have to pay with more taxes unless this mismanagement stops soon.
Let's hope that the Spring elections will bring focus to some of these matters.
Good job Marilyn and Elizabeth!!!
Did you ever imagine the depth of the "rabbit hole " you started down in this "wonderland" of City Affordable housing? We knew it was bad then, but this just gets more and more surreal!!. Can't wait for the next chapter....
Excellent work! I have been appalled from the get go at the fact they never had an appraisal done when the purchase of BMC was made. I am a real estate broker and I would not have a job if I allowed this to happen with one of my clients.
I was told that the city felt like they did not have time to get an appraisal because the seller told the city that they "might' be getting another offer. Are you kidding me-might be getting another offer! I am going to have my sellers use this and see what happens. Which I am sure will be a big laugh from the potential buyer! What happened to proper due diligence? Why did they not make the sale contingent on the appraisal? This is very normal in real estate transactions. It would be even more appropriate when you consider that the city is spending millions of dollars of taxpayers money. I am shocked they did not insist on it as a matter of fact. Of course I should not be that surprised. You only have to go to one council meeting and watch how Mayor MIck treats the citizens of Aspen. Obviously, he treats major purchases using tax payers money with no respect just as he treats the citizens of Aspen with no respect.
It is time to take back city hall. We all have to help. Thank you Red Ant for your tireless research and for providing a forum from which the citizens can speak.
Have you heard that the employee housing (the upside of rental combined with the downside of ownership) is not working in Snowmass?
A friend told me the following:
"...there are people trying to sell their town homes in Snowmass Village to move into their rodeo place homes and they are having trouble finding buyers. They are not selling in Snowmass lottery so they are going into the Aspen lottery."
The real world intrudes! Next they'll offer it to anyone who has the money and wants to live in Snowmass -- rules only apply when expedient.
Keep up the good work.
I know the Appraiser that the city is using for the BMC parcel that the city paid 18M for. The city didn't like the first low appraisal so--they combined it with the three acres that we own next to it to try and hide the low appraisal. The appraiser was given a bunch of improbable suggestions as to the parcel's possible uses and he still couldn't make the numbers work. If a real estate broker trys to influence an appraiser's opinion This is corruption by the city manager.
The City of Aspen and Mick Ireland need to respond to this letter to the editor from John McBride. If anyone stands to benefit from the BMC West sale, it's John McBride, as the largest property owner at the AABC. Yet, as John logically states below, the property is worth less than half than what the city paid for it.
"Last week, the appraisal for the BMC parcel that the city of Aspen bought in 2007 was reported at $16.8 million. I was surprised. Although the appraisal was lower than the $18.25 million the city paid, it still is way too high. I continue to believe that the real market value is somewhere around $6.5 million.
Prior to the city’s purchase, the highest price paid for land in the Airport Business Center was $30 a square foot. At that rate, the value of the lumberyard, based on comparables, would have been $5.34 million. Further, under the income approach, if the city nets $600,000 a year from the lumberyard, at an 8 percent cap rate, would yield a value of $7.5 million. $6.5 million is in the middle between the comparable value and the cap rate value. It seems to me a fair market value that an appraiser could defensibly assign.
Confused by The Aspen Times and Daily News articles on Friday of last week, I contacted the appraiser hired by the city to conduct the recent BMC appraisal. Dave Ritter, who is a friend of mine, clarified the large discrepancy.
Dave explained to me that he was not asked by the city to do a fair market value appraisal of the BMC parcel. Rather, he was asked to do a “hypothetical appraisal,” imagining a very large housing project was already built on the land — thereby paying no attention to existing constraints. A fair market appraisal and a “hypothetical appraisal” are apples to oranges. Ignoring the constraints overlaid on a piece of property is the essence of a hypothetical appraisal. It is relevant that the public know the BMC parcel contains such limits as county zoning, height and parking requirements, ABC covenants, and the 200-foot greenbelt setback from the highway right of way. This setback, by itself, would almost preclude the development of the city’s adjacent open space parcel. (The city’s statements seem to indicate that this open space parcel is not under easement, contrary to the sign posted on it!)
I asked a longtime banker of mine if he had ever heard of a hypothetical appraisal. He said he had, but that it is not considered a real (defensible, credentialed, well-founded, genuine, factual, bona fide) appraisal. He added, “A hypothetical appraisal is really just a developer dream and as such has no merit or value, especially for a loan.”
Still somewhat shocked, I looked up “hypothetical appraisal” under the American Society of Appraisers. Their definition:
“A Hypothetical Appraisal is an appraisal based on assumed conditions which are contrary to fact or which are improbable of realization or consummation … It is improper and unethical to issue a hypothetical appraisal report unless 1) the value is clearly labeled as hypothetical; 2) the legitimate purpose for which the appraisal was made is stated; 3) the conditions which were assumed contrary to fact are set forth … a hypothetical appraisal … which is so much above the market that it is practically impossible for it to be realized, would not serve any legitimate purpose and its issuance might well lead to the defrauding of some unwary investor.
Wow!
Does the public understand that the city’s justification for overpayment of $1.45 million is based on an imaginary appraisal, which by definition is “contrary to fact?” If you were selling a home, would you list the house for what it could be if it were remodeled? Or for what it is worth today?
Obviously the city is trying to justify the high price they paid. But more than that, they seem to be indicating that they believe they can violate a long history of established principals and guidelines that for years have defined the character of the ABC.
Had the city performed a proper fair market value appraisal prior to purchase of the land, they could have saved tax payers $10 million to $12 million.
Alternately, if the city had been unable to negotiate a deal with BMC, they could have condemned the property. Condemnation demands a fair market value appraisal. The fire district did this at North 40, when they bought their land for $27 a square foot — the fair market value. "
Normally I am not one to share my personal concern with our local government decisions but I just can’t let this one pass. I find it reprehensible and unconscionable that our current council cannot admit that a terrible mistake was made in purchasing the BMC property at the price that was paid. What I find even more disconcerting is that it appears they are trying to “hide” this fact from the public.
Please let your elected officials know of your concern on this issue and/or at a minimum, ask them to be more honest and forthcoming with information. Next time I am selling a property, I’ll see if a buyer will take a “hypothetical” appraisal!!!
Great comments by "Broker." Another fact that I think may have been ignored is that the City’s purchase was for affordable housing. Shortly before the City bought the BMC parcel, Mick voted in opposition (no) on Centurion’s application to build the Lodge at 1A (prior to the coop). Mick said in his statement for denial, was that one of his major reasons do deny the approval was the fact that much of the affordable housing was “beyond the roundabout.” That did not seem to be an issue though for use by the City for their affordable housing.
RESPONSE TO ABOVE MCBRIDE COLUMN,
Ireland and Ed Foran
submitted by Ed Foran
Posted by Mick Ireland on Facebook:
2) Why John McBride is wrong about the BMC purchase
John McBride's letter to the Aspen Daily News is well written but factually awry for the following reasons:
First, he claims the property is not zoned for affordable housing, it's intended use and this means it is less valuable. However, it is adjacent to the city and could be annexed and re4zone at the city's discretion. This makes the appraisal different from private sector evaluation because the city has zoning authority and private purchasers do not.
Second, he claims that the city owned property is restricted to open space uses because there is a sign on it. However, the deed restriction does not apply to the flat land below the slope, about 2.5 acres.
Third, the set back from the highway is not 200 feet, it is 100 feet and that setback does not apply to the city owned property at the base of the hill. The 100 foot setback for the BMC property can be varies as John knows well.
Fourth, the covenants on the land can be removed by purchase or condemnation. The condemnation tool John suggests for the property as a whole is available for minor restrictions such as the covenants.
As a result of the purchase, the city has 7 acres of develop able property for which it paid $18 million. The value of that property that it now has at the time of purchase was $25 million. This is a good purchase since there are no other available 7 acre properties on transit lines available within the Urban Growth Boundary.
Ed Foran’s response on Facebook:
3) A hypothetical appraisal is worthless
What about the "hypothetical appraisal?" Not only is this not a legitimate appraisal, but it was presented to the public as a market value appraisal, which was misleading at best.
Secondly, why is the City not using an appraiser with an MAI designation? While Dave Ritter is qualified to do appraisals for certain types of properties, he is not an MAI and does not have the experience or qualifications to value a property of this magnitude.
As you know, the MAI designation requires an appraiser to go through a rigorous education and approval process before receiving this designation.
Aspen has one of the industry's finest MAI's in Randy Gold at the Aspen Appraisal Group. Randy has lived here for over 30 years and has an intimate knowledge of our unique real estate market in addition to holding an MAI designation, the highest designation you can receive as an appraiser.
Randy is considered the foremost appraisal expert in Aspen and respected by property owners, developers and lenders alike for his objectivity and attention to detail. Why was he not used? Was the City concerned that he would value the property at less than the purchase price, thus causing embarrassment for City officials?
It seems to me that The City of Aspen has a fiduciary duty to the taxpayers of this community to make every real estate acquisition subject to an MAI appraisal that ensures that the buyer is paying fair market value. This is a normal condition of any real estate contract. Mr. Ritter's "hypothetical appraisal" is worthless. A bank would not even consider it as a document to verify whether or not can be financed.
How can Mick possibly defend this silliness?
Of course the market value is what a willing buyer would pay to take the considerable risk of zoning and building to his needs.
That value is FAR lower than the “appraisal” value based on all sorts of pie-in-the-sky assumptions that could never be realized by a private buyer.
I believe that what Mick is trying to tell us is that the City paid the seller a value that assumed that a private buyer could have instantly had the property rezoned for their intended use, and have the same ability as the City to condemn property, etc.
Clearly the City overpaid, and they are trying to do anything other than admit it.
This is not unlike the “negotiated” audit reports on Burlingame. The facts have been changed to generate an absurd conclusion.
After reading Mick's response to McBride's op-ed all I can say is please Mr. Mayor stop with all of your misleading statements and except responsibility for all the mistakes made in your mediocre rule. Enough all ready Mick. The public is finally catching up with your dishonest megalomaniac ways. Leave elected office and get a real job . My one piece of advice. If you are as rude to co-workers at a real job as you've been as mayor I hope you enjoy the same dissatisfaction and disrespect you've shown .