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HomeMy WebLinkAboutminutes.council.19860924Co_ntnued_Meetin4 Aspen Citv Council September 24, 1986 Mayor Stirling called the continued meeting to order at 1:10 p. m. with Councilmembers present RED -~tOOF INNS City Manager Bob Anderson told Council Red Roof owes the city a payment November 25, of $400,000 towards the principle amount and $200,000 interest. Similar principle payments are owed each November for the next four years and a reduced interest at 10 percent until it i s paid. The total owed to the city is $2,600,000. Anderson told Council Red Roof has said they are ready to give the property back to the city. Red Roof has talked to prospects to purchase the property, and the only remaining interested party is Dick Butera. Anderson told Council Butera feels the property is worth 52 , 000 , 000 totally ready for operation. Anderson reported he has discussed this informally with an appraiser who felt 52,000,000 ready for operation is not unreasonable. Anderson told Council the lodge is not ready for operation. Red Roof owns the furniture and fixtures. There is a leaky roof; the tennis courts needs resurfacing; the swimming pool has plumbing problems and cracks; there is deficient plumbing in the lodge rooms, and the lodge is in need of a new phone system. Anderson told Council staff has negotiated this for the best interests of everyone. Anderson noted 5200,000 interest is due immediately. The concept in the proposal is that the city has no current lien on the furniture and fixtures. A lien on furniture and fixtures would be presented to the city in lieu of interest payment. Anderson said this would give the city added value and put the city in a better position to remarket the property. Anderson told Council Red Roof Inns has said they will not pay the city, and the city's only recourse would be to get back the property without the furniture and fixtures in lieu of the interest payment . The principle of 52,000,000 would still be owing. Anderson told Council the proposal staff is negotiating is that the principle would be deferred until the last payment. The interest would be on a sliding scale of 3 percent the first year; 4.5 percent; 6 percent; 7.5 percent and 9 percent averaging out to 6 percent. Anderson told Council the city has been investing money in CDs between 5.5 and 7 percent. Anderson said Butera would receive a credit toward the cash out price of $2,000,000 of 5200,000 for a list of immediate improvements, like the roof repair, plumbing, pool, tennis courts and installing a phone system. Butera would pay interest on the full $2,000,000. Butera's current intent is to add 5100,000 worth of capital improvements, which would add value to the property. These 1 Continued Meeting Aspen Citv Council September 24,___1986 improvements will have to go through the city's PUD process. Anderson said the payment price of the property will also be reduced by the amount of the capital improvements. Anderson told Council the ballot language would not preclude adding tennis courts. Butera would like to readjust the lobby of the lodge to be more central. This may involve an increase of the square footage, which may require a vote of the electorate. City Attorney Taddune pointed out with the addition of tennis courts, the value of the city's collateral is increasing. The question is does Council want to build into the formula an incentive to get cash rather than to remain in a financing mode. Taddune said the more money the operator puts into the property, the more incentive there is to buy it out. Dick Butera told Council he would spend up to $300,000 immediately for everyone's benefit, which would be credited at the end. Butera pointed out Council wold have to approve the last 5100,000 of the improvements. Anderson said the city will get a revolving lien for the length of the loan for all the personal property used for the operation of the restaurant and lodge. Anderson told Council staff agrees there should be some personal guarantee behind this transaction. Anderson said Butera does not agree to a total guarantee. Butera said he does not want to guarantee a business that has been losing money for 4 years, which he feels is unreasonable. Butera said he would make the furniture and fixtures a guarantee and he would guarantee a deficiency portion of 5250 ,000 . Butera said the city will be acting as a banker and should look at his 27 year record in business. Taddune said Butera will be purchasing this from Red Roof ; however, the city will have t o agree to restructuring the loan. Taddune recommended this be done in the form of an ordinance; staff is requesting conceptual agreement at this point . Mayor Stirling pointed out in the sliding scale, the interest amounts to 5600,000 which is equivalent to the same amount of interest from Red Roof with 5 years for payment rather than. 4. Butera told Council Red Roof has agreed to sell this to him for 550 ,000 less, if this transaction takes place immediately. Butera said under this deal the city will hold a lien on a furnished hotel versus an unfurnished hotel. Taddune told Council Red Roof, for the 550 , 000 reduction, wants a complete release from the city from any and all further liabilities. Taddune said the city should require that the roof be repaired as part of this package. Mayor Stirling noted the interest payment on this proposal is very close to the original agreement. If the city were to run the property, they would have to purchase furnishings at $150,000. Mayor Stirling said it is preposterous to require a 100 percent personal guarantee from Butera, something can be 2 Continued Meeting - Aspen Citv Council Septemb~r___24, 198 negotiated. Councilwoman Fallin said she would agree with a negotiated guarantee. Councilwoman Walls suggested Council schedule a site visit before they make a final decision. Council agreed. Butera said he will put $500,000 out initially and guarantee another 5250,000. Mayor Stirling suggested a deadline on spending the 5200,000, which will get the city 5450,000 immediately. Mayor Stirling asked who will operate the hotel. Butera said this will be run through his reservation system, which controls 94 rooms at the Jerome and 92 rooms at the Aspen Club lodge. Butera told Council his operation has taken existing operatio n and improved them. Councilwoman Fallin said the quality of management is important. Mayor Stirling moved to charge the city manager to bring to fruition the terms of the agreement as it has been generally, conceptually outlined to Council; seconded by Councilwoman Fallin. All in favor, motion carried. Anderson said Red Roof will refinance the loan and there will be separate agreements with the city. VOLK ENCROACHMENT Jay Hammond, city engineer, told Council there is an existing gas meter adjacent to the contemplated location. Hammond suggested the applicant look at locating their gas meter on the Molterer property. There is an existing gas meter on the Aspen Arcade building also, and the location of this gas meter on that building with a bollard would not be unreasonable. Hammond said this would require an encroachment license. Mayor Stirling said if this is the only alternative, this will have to be accommodated, and requested Council be kept apprised if an encroachment license is necessary. Council adjourned into a work session at 1:45 p.m. v~~ ,` ~ _ M,-'~- Kathryn S. och, City Clerk 3