Steamboat Springs The Yampa Valley Housing Authority board and executive director sent a letter this week to the Steamboat Springs City Council and Routt County Board of Commissioners stating that the organization plans to suspend loan payments on its Elk River Village property this month.
The Housing Authority’s decision to stop paying nearly $10,000 per month on the parcel it purchased in 2006 for $2.3 million is motivated by a need to restructure the agreement with First National Bank of the Rockies.
Bank President Peter Waller said Thursday that he could not comment on the situation because of financial privacy laws.
Until this past year, the Housing Authority had been paying only interest on the $2 million principal of the loan. It has been refinanced each year since its purchase. The most recent appraisal for the property was $1.5 million in 2011. The Housing Authority has been approached with two offers far lower than that in the past year.
The Housing Authority is a government entity that was formed in 2003 by an intergovernmental agreement between the city of Steamboat Springs and Routt County, which still fund the organization with annual appropriations totaling $168,000. The agreement that formed the Housing Authority states that neither the city nor county is responsible for debt incurred by the organization.
The Housing Authority’s letter states that First National Bank of the Rockies should know that because the organization’s funding is subject to yearly appropriation that it does not have the ability to independently repay the loan without successful development of the property.
According to Dee Wisor, a Denver-based attorney who is providing legal advice to the Housing Authority, the loan agreement is in violation of the Taxpayers Bill of Rights.
“What TABOR says is that any multiple-year fiscal obligation has to have voter approval,” Wisor said.
As the purchase of the Elk River Village parcel did not go before voters, the loan is unenforceable, according to Wisor.
To comply with TABOR, according to Wisor, the loan would have to be converted to a lease purchase transaction, where First National Bank of the Rockies would lease the property back to the Housing Authority subject to yearly appropriations by the organization.
Wisor said there is case law to support that lease purchase agreements comply with TABOR. Less clear, he said, is what would happen to the property if the issue of the loan’s enforceability was pressed. Depending on specific circumstances, the bank could keep the property but not be able to recoup the difference between the current value and the principal of the loan or it could lose both and end up with nothing.
It is unclear what position First National Bank of the Rockies or its counsel has taken on the enforceability of the loan.
In a meeting with the Steamboat Today, Housing Authority board President Kathi Meyer, former board President Rich Lowe and Executive Director Jason Peasley said the obligation also limits what the organization can accomplish.
The properties it manages are largely self-sufficient, but the Elk River Village loan payments use so much of the contributions from the city and county that the organization has little ability to pursue other projects.
The Yampa Valley Housing Authority hopes that by suspending payments, it can apply pressure on First National Bank of the Rockies to agree to a deal that addresses the TABOR issue and reduces the organization’s obligation.
The letter to the city and county states that the organization would like to see the loan principal reduced between $800,000 and $1 million, which is what it estimates to be the current value of the parcel.
City Council members and county commissioners were either not able to be reached for comment or had not read the letter.
To reach Michael Schrantz, call 970-871-4206 or email mschrantz@SteamboatToday.com