ISSUE # 28 ... ASPEN'S LAND-BANKING NEEDS A BAILOUT

"The problem with Socialism is that you eventually run out of other people's money." -- Margaret Thatcher

HOUSING AND LAND-BANKING FOLLIES

In 2007, City Officials obviously thought the flow of second-homeowner real estate transfer taxes would never dry up. Did they all drink the Kool-Aid served at the September, 2007 Housing Summit which was Mayor Ireland's initiative to fan the flames of the insatiable need for Affordable Housing within Aspen's city limits?

"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

Comments

[TNT]

Dear Red Rant

Here's how Mick can defend the purchase. From today's Aspen Daily News:

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BMC West property appraisal is correct

I am writing to respond to John McBride's misleading comments re­garding the city’s purchase and subsequent appraisal of the BMC West property. The appraisal for the BMC parcel, which the city of As­pen bought in 2007 for $18.25 million, valued the property at $16.8 million. Additionally the adjoining 2.5-acre Burlingame parcel was valued at $8.9 mil­lion, making the combined property worth $25.7 million. The city-owned Burlingame parcel would have been very difficult to develop for housing without the purchase of BMC West due to access and other issues. Aspen City Council and the Pitkin Board of County Com­missioners agreed that this is a great site for high-density affordable housing. McBride clearly hopes for a much lower density development scenario, but his hope does not make our development plans ille­gitimate, or the appraisal based upon those plans. McBride’s primary griev­ance is that the city should have valued the property at its current zoning and use (a lum­beryard), rather than using a hypothetical approach imagin­ing that a large housing project would be built on the land. In reality, the BMC West property was purchased explicitly for the development of high-densi­ty affordable housing, and that is why the appraisal was based on this important scenario. Ap­praisals that assume changed conditions are perfectly appro­priate — especially when the decisions to change the cur­rent development guidelines are entirely within the hands of the purchasing government. Aspen City Council or the Pit­kin Board of County Commis­sioners will eventually rezone the property to allow for this development scenario, so un­like with a private developer, there is no question about gov­ernment being able to rezone a parcel which they own. McBride also asserts that there is a 200-foot greenbelt setback from the highway at the BMC West site, which is incorrect. There is a setback of 100 feet for the parcel, and our adjacent Burlingame parcel has no such setback require­ment.
While the acreage next to BMC is cur­rently dedicat­ed open space as he suggests, the city has the right to remove that conserva­tion easement as specifically stated in the Bar/X pre-annexa­tion agreement.
McBride also claims that the Aspen Airport Business Center covenants are signifi­cant constraints to develop­ment on these two parcels, but McBride himself suggests that the city could have purchased the BMC property through condemnation rather than ne­gotiation. It should be obvi­ous then that the application of AABC covenants are also subject to condemnation and are not absolutely rigid restric­tions on redevelopment.
However, even though the city of Aspen purchased the BMC West parcel for high­density affordable housing, no actual development plans have been created, and few discus­sions have taken place with the neighbors, the Colorado Department of Transportation, Pitkin County, possible hous­ing partners or the community as a whole. We have simply purchased the parcel and in do­ing so, created a 7.24 acre par­cel that is available for provid­ing critically needed affordable housing for this community’s future.
Argue about price if you like, but this was an unparal­leled opportunity that created a huge increase in value for our adjacent Burlingame par­cel. Where else are you go­ing to find 7.24 acres of land easily developable for afford­able housing within the urban growth boundary, easily acces­sible by public transportation with utilities, and in a place where construction of new housing wouldn’t affect the neighborhood greatly?
The BMC West site will be a critical part of this commu­nity’s affordable housing pro­gram for many years after the politics of the moment have been forgotten. McBride’s no­tion that the value of this par­cel is only $6.5 million is the real hypothetical fantasy in this situation, not our appraisal or purchase of this vitally impor­tant site.
Scott Miller is capital asset di­rector for the city of Aspen.
GUEST COMMENTARY BY SCOTT MILLER