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"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
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February 13
Reader Comments (21)
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. "