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HomeMy WebLinkAboutminutes.council.19880824Continued Meeting Aspen City Council August 24, 1988 Mayor Stirling called the meeting to order at with Councilmembers Fallin, Isaac, and Tuite present. ASPEN MOUNTAIN LODGE PUD AMENDMENTS Mayor Stirling said Council needs to finish the last condition in the P & Z resolution, the last paragraph in the P & Z resolution about granting an extension to the project, and whether there has to be an ordinance to complete this process. Fred Gannett, city attorney's office, told Council their approval may be by motion, resolution or ordinance. Alan Richman, planning director, said staff will bring to Council the amended PUD agreement. Council may approve this either by motion or resolution. Richman said the terms of P & Z's resolution are embodied in the PUD agree- ment. Mayor Stirling said the purpose of an ordinance is to signal a public hearing. Mayor Stirling said he has opened this throughout the process of continued meetings so that the public was able to speak, but these meetings were technically not required to be public meetings. Mayor Stirling said there also is a memorandum received by Council from Joe Edwards. Richman told Council staff has received the PUD agreement, which establishes the condition of how the Ute City Place will be addressed. Richman told Council the applicant is committing that Ute City Place will be built and occupiable in conjunction of construction of phase one. The 37 employees are not being placed up against any required credit for the hotel. The 161.5 employees housed are required outside the Ute City Place. The language in the agreement speaks to if the audit should demons- trate the need for additional employees, then Ute City Place units may be used to accomplish the needed crediting. The agreement does not require that Ute City Place be the project used to credit. Perry Harvey, representing the applicant, said the applicants do not know if this project will be acceptable to the city or whether there would be other projects that might be needed. When the result of that audit comes in, the applicants will go through it with Council. Bob Hughes, representing the applicant, said if there is a shortfall in the audit, the applicants will be protected. The housing may come from that source or another source acceptable to Council. Hughes said the applicants are committing to the number of employees housed. Richman pointed out the language recognizes if the audit shows a need for additional employee housing, there will be planning time and construction time and provides a 24 month period from the audit to actually have housing occupiable. Richman said Ute City Place would provide immediately occupiable housing. Richman told Council they will need to schedule some time to go over the PUD agreement. 1 Continued Meeting Aspen City Council Auaust 24, 1988 Richman told Council if the PUD agreement is presented on the September 12 agenda, it will be difficult for Council to take final action. Richman said staff has just seen the PUD agreement and until staff reviews it, he will not know the extent of the issues. Richman said this will replace the PUD agreement adopted for the Roberts plan. Councilman Isaac said he assumed the only changes made to the PUD agreement are the ones already discussed by Council. Council scheduled another continued meeting for September 6 at 5 p.m. and to have the city manager evaluation at 7 p.m. Council requested staff circulate the PUD agreement before that meeting. Mayor Stirling moved to reconsider condition #2 of the P & Z resolution; seconded by Councilman Isaac. Mayor Stirling said his notion is to add that Ute City Place be required in this particular 292 room Ritz hotel as an additional requirement. Mayor Stirling said the city needs more housing and not part of an audit done in 2 years. Mayor Stirling said the applicants would have had to pay over $1,000,000 in a cash-in- lieu situation. Mayor Stirling said the city needs the addi- tional units for the impact this will have on the valley and these units need to be in town and need to be part of phase one and not a credit in the future. Councilman Tuite said there is a moral issue on employee housing in this community. Any project should supply 100 percent. Councilman Tuite said the other moral issue is that the prior group had an agreement; f or 5250,000 they would get credit for so many employee units. Mayor Stirling said one of the purposes of a growth management plan quota and having dates to re-evaluate it are to see what the changed circumstances are. Mayor Stirling said the circumstances for housing in town are much more dramatic than when the PUD was originally adopted 3 years ago. Mayor Stirling said he feels it is imperative the city requires these housing units. John Sarpa, representing the applicant, told Council the appli- cants have worked hard to come up with creative new ideas and have put cash on the table to commit to build housing. Sarpa said the city has not had a lot of people offer to build new housing for the community. Sarpa said the applicant bought the employee units at Hunter Longhouse. Sarpa said the applicants went through the process with P & Z and they changed the formula which had been applied to every other applicant up to then. The P & Z changed the formula, reduced the credit for housing the applicants were to receive to increase the housing requirements. Sarpa reminded Council they were not comfortable with the housing commitment from P & Z. The applicants discussed what they could 2 Continued Meeting Aspen Cit Council August 24, 1988 do to provide employee housing right now, not in th000u000eoffere applicants came back with Ute City Place, a $2, Council also made it clear they were not comThet a lel icants shave all future credits for Ute City Place. PP agreed to let the audit determine that and to build the units right now. In the future, because of the audit, this all may be required for the Ritz. Sarpa said the applicants are working with the community to come up with more employee housing. Councilman Isaac said he received a letter on Ritz Carlton Laguna Nigel hotel which has 391 rooms. The stationery quotes a staff of 750 employees. Councilman Isaac asked when this goes through the audit process what is being counted as an employee. Harvey said full time equivalent employees will be counted. Sarpa said the facility of Laguna Nigel is a special facility with many, many acres. Sarpa said this stationery is issued by each hotel and is to help lure customers by feeling they are going to be pampered. Sarpa told Council Laguna Nigel has valet parking with 40 or 50 employees doing that and 40 or 50 grounds keepers. Sarpa said the Ritz and the applicant have done an analysis of the employees needed and they both feel comfortable with a 1 to 1 ratio. The number will be higher in full season and when there are a lot of functions at the hotel. Councilman Isaac asked if the audit will show what the real employee impact is. Richma n said this is a 2,080 hour person as opposed to a 9 month employee. Richman told Council he has visited the Laguna Nigel property; the grounds are extensive and incredibly kept up. Councilwoman Fallin and Mayor Stirling in f avor; Councilmembers Tuite and Isaac opposed. Motion NOT carried. Mayor Stirling said after the audit is complete, there will be an evaluation of how many workers there are. Mayor Stirling said the city has also talked about this being adjusted upward. Harvey said if the audit shows 161.5 does not equal 60 percent of the full time equivalent employees, they will provide additional housing. If the 161.5 is greater than 60 percent of the full time employees, the applicants received a credit. Sarpa told Council the applicants and P & Z had an extensive review of parking in the project. Sarpa told Council the project is providing more than is required by P & Z. Harvey told Council the P & Z recommendation was 220 parking spaces provided in the parking structure. Harvey told Council the applicants came in with 235 spaces, but of that 42 spaces are compact size. The applicants have requested a code amendment to allow for 20 percent of the spaces to be compact at 7-1/2 by 16 feet. Richman said this was to enable the applicants to provide more than just the minimum spaces. Harvey said the code amendment has not gone through the process, so the applicants will provide 220 full 3 Continued Meeting Aspen City Council August 24, 1988 parking spaces. Harvey submitted a copy of the parking plan to the record. This plan shows 220 full standard size spaces plus an additional 13 compact spaces. Harvey said there are 2-1/2 levels of parking. Richman said this plan meets the staff's objection that P & Z was approving parking spaces that did not meet code specifications. Mayor Stirling asked how many spaces are designated for employees. Richman said the formula only requires 10 spaces, the PUD agreement requires 30 spaces be set aside for employees. Richman told Council all the transit disincentives, like van service, are listed in the agreement. Mayor Stirling asked what plans are being made for workers transportation. Harvey said there is an agreement in the PUD to provide bus passes, shuttle service. All the employee housing projects are within in walking distance or on transportation routes of the hotel. Councilman Isaac asked if would be possible for the city to audit the shuttle service at the same time the employees are audited to see how it is going to make sure the applicants are providing the services represented in the PUD and that they are working. Richman said he will add this to the agreement. Richman pointed out when the units are deed restricted, they will not necessarily be occupied by employees of the hotel. These units may be occupied by employees of the community in general, since this is the philosophy of the housing program. The applicants agreed this can be added to the agreement. Harvey said he would like the parking program to read, "a minimum of" so if the code amendment passes they can change the parking configuration. Richman said the agreement should read "there shall be a minimum of 220 parking spaces provided". Councilwoman Fallin moved to approve condition #6; seconded by Councilman Isaac. Mayor Stirling said the city and applicant have discussed utilization of parking spaces by people who are not hotel guests. Sarpa said the applicants are hoping to work with staff on the availability of parking spaces which will be empty. Sarpa told Council the Ritz's best guess is that they will use about 35 percent of the 220 spaces in the winter. All in favor, motion carried. Richman told Council P & Z spent a lot of time on the issue of community use of the parking spaces. Richman said P & Z encouraged the applicant to submit a code amendment to allow commercial use of parking in this zone district. Richman told Council staff does not support this code amendment as the city's transportation plan talks about parking provided on the other side of Durant. Harvey said the parking study says not to 4 Continued Meeting Asgen City Council August 24,_1988 provide a parking structure on that end of town as it will encourage traffic to go to it. Harvey told Council an initial proposal was to monitor the daily guest requirements and use the daily ski report to give how many spaces are available f or daily skier parking. Council indicated they are interested in discuss- ing a code amendment like this. Richman told Council the LTR zone prohibits this usage. Councilwoman Fallin said she would be hesitant to allow this as a permitted use. This is a special case. Harvey said it is the applicant's intention to use the unused spaces for daily skier parking. Councilman Isaac asked if the performance bonding is adequate to protect the city. Richman said the bond the city has deals with the excavation and guarantees public improvements. Richman said the code is silent on bonding for private improvements except f or landscaping. Richman said if the building were to go under construction and for some reason was stopped, the city would not have anything to tear down or to complete construction. Sarpa said the city has $1,000,000 cash and $800,000 letter of credit. These only go to when there is full funding in place; when there is full funding in place, allocations will be made out of that funding for those purposes. Bob Hughes said there will be a mortgage lender who has every incentive of getting the project completed. Mayor Stirling asked if the financing is officially in place. Sarpa said the applicants have not closed the financing; the applicants are in the final phases of negotiations. Councilwoman Fallin asked when the permanent financing will come. Sarpa said 45 to 60 days from about now. Harvey said a loan commitment is conditioned on approval for the project, a building permit. Sarpa said the applicant's construction firm will be required to bond their completion. Sarpa said a lender will not lend money without that kind of bonding. Sarpa told Council their contrac- tors, PCL, have no problems obtaining a bond of this size and are prepared to issue that bond immediately. Councilwoman Fallin said there are no guarantees on what will happen on lot 6 and in phase two. Councilwoman Fallin asked if the applicant can sell parcels which could be developed separ- ately. Richman said the Aspen Mountain PUD covers all the individual lots. Any lots separated or sold would be bound by the PUD and the PUD agreement, which runs with the land and not with the owner. Hughes said all the parameters for lot 6 that have been discussed are incorporated in the PUD agreement. Councilwoman Fallin each parcel could be sold to individuals and asked if each representation for each parcel is written down. Richman said the agreement identifies all the lots. Richman said the agreement deals with maximum development on each site. 5 Continued_Meeting Aspen City Council August 24, 1988 Hughes said there is a binding PUD agreement in place right now. The applicants are amending that agreement. Sarpa said in an effort to show Council the applicants mean what they say about employee housing, they will agree to dedicate all 37 employees housed in 22 units at Ute City Place to the Ritz. Mayor Stirling said the last paragraph states, "The City Council will grant an extension to the project to the extent necessary to permit the completion the processing of these amendment, includ- ing but not limited to the recordation of a plat and agreement and obtaining a foundation permit". Richman told Council his memorandum addresses this paragraph. Richman reminded Council resolution #11 established September 12 as the deadline by which processing of all amendments needs to be completed. Richman said the resolution does not give staff the kind of guidance its needs at to what that means, whether it means the Council process being completed or the actual recording of all documents and issuing of all permits for the approvals to be final. Richman said in April staff was looking at the GMQS deadline being April 15th and staff was suggesting that a building permit needed to be obtained by April 15th, an excavation and foundation permit. Richman said there was extensive discussion in April and May about this topic. The minutes mention that the PUD agreement might need to set out a formal time table within which, presuming the September 12th deadline was met, the other actions required, the recordation of the plat and the issuance of the foundation permit would be set out within the PUD agreement to make it clear Council had agreed to the time frame. P & Z is recommending Council act on this and not leave it ambiguous. Richman said Council has the authority to hear appeals or make judgments on interpretations of the code given by the staff. Richman said staff has interpreted the applicable section of the code to require that an excavation and foundation permit be obtained. Council could make the determination that the excavation permit obtained April 15th was the building permit, and this issue would be closed. The other approach would be to grant the project an extension. Richman said the September 12th deadline is 122 days after the April 15th deadline. The code talks about. 180 days, and there are 58 days that have not been used since the last time Council acted on this deadline. Richman said the applicant accepted the 122 days; there was no requirement it be less than 180 days. Mayor Stirling asked when a foundation permit would be issued. Richman said the first thing would be to obtain Council's approval. Richman said there are drawings in the building department. Sarpa told Council they have submitted an initial 6 Continued Meeting Aspen City Council August 24, 1988 package and are meeting all the time frames asked by the building department. Richman said the normal time table would be to wait until the PUD agreement is signed and then have the plat and elevations recorded. These are documents that will be used as checks against the foundation plans. Councilman Isaac said in May when Council was discussed resolution #11, they set September 12 as the deadline for approval or denial of the PUD agreement and left any reference to building permits or recording the plat up in the air. Councilman Isaac said to meet the requirements of resolution #11, Council has an obligation, and the applicant has met their obligation, to finish the review by September 12th. Councilman I saac said it makes sense to put in the PUD a time line for the other things to happen. Bob Hughes said the applicant's take the position they have met their requirement. The applicants opt for the first alternative that the excavation permit did suffice. Mayor Stirling said he has no interest in the first approach. Councilwoman Fallin said she doesn't either. Mayor Stirling said the Council should probably grant an extension. Harvey said the applicants have submitted the initial draft of the PUD agreement to staff . Harvey said the requests made by staf f on the plat involve up to 35 pages, and these will be submitted by early September. Harvey said it may take up to 4 weeks to review these and make changes. Councilman Isaac asked if Council prefers to go through an extension process as opposed to putting a time schedule in the PUD agreement. Mayor Stirling said the amendment process should be extended 58 days. Councilman Isaac said Council made an agreement to produce a decision by a certain date. Mayor Stirling said all the aspects of this decision cannot be fulfilled. Mayor Stirling said the plat cannot be recorded and the permit obtained by then. Councilman Isaac said it was not suggested this would be done by September 12th. Mayor Stirling asked if the additional review work should happen within an extended period or outside of the period. Richman said the September 12th deadline is silent on that, but staff's opinion is it should have stated it as a requirement. Councilwoman Fallin said her interpretation is that everything should have happened by Septembe r 12th . Councilwoman Fallin said even though Council fulfills their commitment of all the review by that date, the rest of the commitment cannot be made. Richman said it is just too much to do in 122 days. Councilman Isaac said Council ought to make their decision so that the community knows what the decision is and what the project is. Richman said he would like to see Council finish the agreement by September 12th so that staff can keep within the time frame on the plat. 7 Continued Meeting Aspen City Council Auaust__24, 1988 Mayor Stirling suggested Council continue this meeting to September 6 and receive a request for extension from the appl- icant and to also complete work on the PUD agreement. Council could then pass on the PUD agreement on September 12. Councilman Tuite moved to direct staff to take all the approved conditions and move forward with them to be returned on September 6 inclusive in the proposed PUD agreement; seconded by Councilman Isaac. All in favor, with the exception of Mayor Stirling. Motion carried. Councilwoman Fallin brought up the cloud that has come up in the last few days with interpretation of the code, section 24-8.3. Richman said there was an August 9 memo f rom Joe Edwards to Council on two issues. Richman said these issues deal with very specific language of the code which is being interpreted in a way unlike that which the city has interpreted the code before. Richman said the issue is whether one can increase the number of units allowed in a hotel through the variations that are per- mitted in the PUD regulations. Richman said there are two aspects in which Edwards argues that it is not possible to do that. Richman said the first one has to do with the term "use square footage limitations". Richman said the memo argues that an FAR, whether internal or external is a form of use square footage limitation. Richman told Council the section referred to, section 24-8.3 (b) of the prior code lists 4 or 5 terms in a row and use square footage limitations is one of them. Richman said these are titles of sections of the code. Richman said this is not some term that could be applied to internal or external FAR. It is a section of the code and refers to a limit on the amount of square footage allowed in a number of commercial-type uses. Richman said the town was concerned about the scale of develop- ment in Aspen, so there is a limit on the size of food market, for instance. All th e limits apply exclusively to commercial structures, hotel and lodges are never mentioned. This talks about food stores, drug stores, warehousing, it mentions 20 or 30 different uses, all commercial. Richman said to him the use square footage limitation argument is absolutely baseless. Richman said to take a very specific piece of language which applies to a very specific section of the code and say it could apply to FAR because the FAR is a form of the use square footage limitation is not a good way to interpret the good. Richman said the other section discussed is 24-8.3(c) which says, "the density of the overall project shall not exceed the allow- able density of the zone district in which the PUD lies". Richman said the term density is not defined in the old code. 8 Continued Meeting Aspen City Council August 24, 1.988 Richman reminded Council the task f orce pointed out that density needed to be defined. The new code defines density as the maximum number of dwelling units per area of land permitted in the zone district. Richman told Council there was some debate in the code review process whether it should relate to floor area. Richman said everyone agreed at that time that density is not floor area; floor area is a mass issue. Density is a how much activity is going on issue and is always measured by the number of units. Richman said the memo recognizes there is no minimum lot area per dwelling unit requirement in the applicable zone, LTR zone. Richman said the memo argues is that despite that fact, FAR sets the form of de facto density regulations. Richman went through an example, a .5:1 to allow 50,000 of the 75,000 square feet in a lodge to be used as units. That is as far as the city's controls of lodging goes. It is up to the owner to decide how many and what size rooms to build; that is the density. Density in a lodge is determined by the size of the rooms that the owner picks. It has never been determined through any regulatory process. Richman said to say that the city's intention in drafting the PUD regulations to say one cannot increase density would apply to the FAR is really extrapolating from what the FAR is limiting. The FAR is limiting the square footage of unit space. Richman said in his opinion the density is not regulated in all zone districts and never has been. Richman said in 1983 before the f i rst application was submitted on this property, the staff faced a number of code interpret a- tions like this. Richman said the format staff agreed to was to submit the request for interpretation in writing. At that time, the code did not have an interpretation methodology. Mayor Stirling said if this is the staff's interpretation, why are specific number of units allowed as quotas in the LTR zone on an annual basis. Richman said the city limits the number of units that can come on in an annual basis but not the dimensional requirements. Mayor Stirling asked how the competition and allocation relates to the code statement about density, which sound they are two different subjects. Richman said they are entirely separate kinds of issues and do not have a bearing on one another. Richman told Council there was a staff level interpretation that Council agreed to in 1983, which the applicant would submit letters requesting interpretations, staff would receive those, discuss them and come up with interpretations. Richman said in cases where necessary, these interpretations would be brought to Council during the conceptual review process. Richman told Council he has some evidence of one interpretation Council made prior to the application being submitted. Richman said inter- 9 Continued Meeting Ashen City Council August 24,__1988 pretations were made by Council during meetings regarding issues. Richman said he provided the applicant with a copy of the only written interpretation on the matter of density, a letter from th e city attorney to Sunny Vann that is in agreement with the interpretation 5 years ago, that there is no density limitation in the zone district. Councilwoman Fallin said there is a letter from Sandy Stuller, city attorney at the time the code was written, stating her recollection is that, except for S PAS, the city intended that uses and densities be determined by the underlying zoning and that PUD regulations be used only to allow flexibility in the building envelope and other site considerations. Richman told Council in 1974 when the code was being adopted, PUDs were very novel concept and became a national concept in 1971. Richman said in 1971, PUDs were a residential concept and were being used to cluster units to reserve open space on environmentally sensitive parcels of land. Richman said it is hard to imagine that in 1974 people thought these would be applied to lodge development. Councilwoman Fallin said Ms. Stuller listed Council and P & Z minutes that document the thought process at that time. Council- woman Fallin said this is a major issue and no one wants to go into this with a clouded interpretation. Councilwoman Fallin suggested Council have an independent counsel to interpret this. Fred Gannett, city attorney's office, told Council he looked at how thi s has been applied over the last 14 years, and if the city has been consistent. Gannett said the city has consistently used the same definition, interpreted this in the same way. The issue has been raised before and has been addressed before by written opinion. Gannett said independent counsel gives a chance to put greater objectivity into the record. Gannett said the city will have to make sure they get counsel that will put their professional malpractice insurance on the line and will give a written opinion. Richman said the preferred way to look at the code is not what someone meant to write but what they did write. Richman said he looks at the language of the code in plain terms. Richman said if the city meant to put a density limitation in this zone district, there is one in the residential zone. The city chose to write no requirement next to that term in the code. Council- woman Fallin said this may not have been applied consistently. Councilman Isaac said it appears the city has already engaged outside Council looking at the pending lawsuit. Councilman Isaac told Council he was approached on this matter today. Councilman Isaac said when he told Paul Taddune this, he expressed concern because Council is being asked to change their legal interpreta- tion and was being asked to do so from adversaries in a lawsuit. 10 Continued Meetin_q_ Aspen City Council August 24, 1988 Councilman Isaac said Taddune questioned the ethical standing of this group addressing individual Councilmembers who are pers- onally being sued. Taddune said there is 'a problem for counsel of the opposite side in a lawsuit engaging the defendants in a 1 awsui t without notifying counsel for the City. Taddune said he talked to the city's counsel in Denver, who is also concerned that an indivi- dual Councilmember who has been sued had been approached without notifying Hall and Evans or Taddune. Taddune said he does not see any downside to having an independent opinion. Taddune said the attorneys did not know what will be discussed when Council- members are contacted and if Council's interests are being protected. Gannett said these types of contacts can be a serious ethical breach. Gannett said he would like to put the other counsel on record that he objects to these contacts; they are inappropriate and should not happen in the future. Bob Hughes told Council they are co-defendants in the lawsuit and find this highly irregular. Councilwoman Fallin moved that Council hire an independent counsel to review the question raised on Section 24-8.3 of the prior City of Aspen Code; seconded by Mayor Stirling. Hughes said he feels it matters not what an independent counsel may tell the Council. Hughes said the applicant's predecessors sought an interpretation; it was given. There has been incre- dible reliance on that. This is the only interpretation that makes sense and is consistent with the code. Hughes said Ms. Stuller's recollection of events that happened 14 years ago with a brief review of the record is not particularly relevant. Hughes said there was an informal process for code interpreta- tions, which was sought and done. Hughes reiterated there has been too much rights and reliance on that interpretation. Hughes said the case of Denver vs. Stackhouse suggests that the notions of estoppel come into play at this juncture, even if there has been erroneous interpretations. Hughes said he is concerned about a red herring issue. Hughes introduced a letter to the record from Joe Wells who was involved in seeking the interpreta- tions out earlier. Councilman Isaac said he was somewhat inclined to hire an outside counsel until he found out that the city already has a law firm representing the city in this case. Councilman Isaac said rather than spending time and taxpayer's money, he would just as soo n use counsel the city already has. Jody Edwards said there are two distinct issues. One is the law suit, which he did not discuss with Councilmembers. The other is interpretation of this code section. The motion is to look at this code section and give an opinion on the section, legislative history, and case 11 Continued Meeting Aspen City Council August 24, 1988 law. Hughes said he assumes this motion will not delay the land use process. Councilwoman Fallin said she would like to have a response no later than September 6th. Gannett said he does not know if the city can have an opinion by that time. Mayor Stirling suggested this outside opinion be within 30 days. Jasmine Tygre said if the city gets independent counsel to say the city's interpretation of the code is correct, it will not stop the plaintiffs from putting that in a suit if they want to. Ms. Tygre said as a practical matter, hiring outside counsel does not accomplish anything. Roger Hunt said he has been on P & Z f or a number of years and has had to deal with the term density. Density has been consistently not applied to lodging because it did not apply to lodging. Hunt said it has been consistently applied when the city deals with density and when they do not deal with density. The city does not deal with density in lodging districts. Jeffrey Evans said this process has been going on a long time with 3 different sets of owners and 2 different land use codes. Evans said there are a number of different interpretations in the code and agreements through 3 different sets of property owners. Richie Cohen asked the ramifications of an adverse ruling to the way the city has conducted their land use proceedings over the last 14 years. Cohen asked if this would leave the city under attack by everyone who has operated under the use of the term density from 1974 to date. Jim Curtis said this is one of the most monumental decisions this community has faced in a long time. Curtis said he is uncertain what is the correct inter- pretation and uncertain if it has been interpreted consistently in the past. Curtis said he feels there would be benefit in getting a third party interpretation. Bil Dunaway asked if this issue will be settled by the litigation. Dunaway questioned spending extra money while the city is already fighting a lawsuit. Edwards said this issue is not part of the lawsuit. Councilwoman Fallin and Mayor Stirling in favor; Councilmembers Tuite and Isaac opposed. Motion NOT carried. Mayor Stirling said this meeting will be continued to 5 p.m. Septmber 6th. CASTL R RIDGE Assistant City Manager Mitchell requested an executive session because staff is seeking direction on negotiations and part of the i ssue deal s with the potential of Castle Ridge Associates filing litigation. Mitchell said there are long term issues to be dealt with; affordability of the rents and the economic viability of Castle Ridge Associates under the existing agre e- 12 Continued Meeting ______ Aspen City Council August 24, 1988 ment. Council directed staff to find some long term solutions. Mitchell said Castle Ridge Associates made a conceptual pro- posals, which staff responded to. Mitchell said staff feels they are fairly close to a negotiated agreement, if Council agrees. If Council does not agree and wishes to stay with the existing agreement, it would be sticky legal situation if Castle Ridge files for bankruptcy. Mitchell said Castle Ridge is saying economically with the tax law changes, they cannot stay with the project as it exists. If the city cannot come to a negotiated settlement amending the agreement, Castle Ridge is saying their only course of action i s to file for bankruptcy. Councilman Isaac moved to go into executive session; seconded by Councilman Tuite. Councilmembers Tuite and Isaac in favor; Councilwoman Fallin and Mayor Stirling opposed. Motion NOT carried. Mitchell said the city's position is compromised either in negotiations or legal actions when the issues are discussed in public. Mayor Stirling asked why Castle Ridge Associates is not able to meet their obligations. Mitchell said the tax law changes do not give them the benefits of the losses and enable them to protect their other income. Mitchell said they are generating a loss and there is no way the rents will cover the operating costs unless the city makes an adjustment in the mortgage payments. Mitchell recommended the city pursue a negotiated settlement. The first major issue is adjusting the promissory note. The way this was originally set up, their mortgage payments were over the same period of the as the bonds. At the end of the bonds, there was still a significant principle. The majority of the payments are interest. This no longer serves Castle Ridge Associates well because of the tax laws. Castle Ridge Associates are suggesting that the mortgage be amended so the payments will cover the city's bond payments. At the end of that Castle Ridge will owe $817,000 which they will pay off at 9 percent over 5 years. Within this payment, Castle Ridge will purchase an annuity for in excess of $200,000 to buy the note down. This annuity will pay the city on a semi-annual basis based on a guaranteed 9 percent interest. Their mortgage payments will cover the remainder so that the city receives sufficient monies to retire the bonds. Castle Ridge would have a lesser amount at the end. This is switching from Castle Ridge paying a lot of interest to paying principle and interest. The second issue has to do with the land lease agreement. Castle Ridge is proposing to provide the city with either a U. S. Treasury note or a certificate of deposit for $150,000 which would guarantee a 9 percent return. By the year 2000, this wold 13 Continued_Meeting Aspen City Council August 24, 1988 be valued at $500,000, which is close to what the city would generate through the $30,000 annual payment and the $150,000 option to buy land at that point. Under their proposal, if they meet all their obligations, when the note or certificate of deposit matures, they would have the land conveyed to them. Mitchell said there is less exposure under this because the city will have the $150 , 000 note in the city' s name. Currently, Castle Ridge is paying $30,000 annually and if they would default the city would not get the money. Mitchell told Council the reason the contract was negotiated the way it is is that the interest was a tax deduction to Castle Ridge, and they could walk away from the project when they had used up their tax benefit. Mitchell said another issue is if the city and Castle Ridge come to an agreement soon, they will fix the major roof problem. If this exceeds the existing replacement reserve, the city will give them future credit for the amounts they put in. Mitchell said he would try to negotiate a replacement repair schedule that addresses other issues like landscaping and carpets. Mitchell said the fourth issue is that Castle Ridge Associates is reducing the amount of rent increase over the life of the agreement. Castle Ridge is reducing their increase to 5 percent per year f or the first 5 years and 2.5 percent f or the remaining 5 or 6 years. Mitchell said he told Castle Ridge the city wanted this capped at the housing authority guidelines. Castle Ridge is concerned because th.e rental cap has not changed in the last 4 years. The housing authority feels this may average 3 percent over the next years. Mitchell suggested the rents increase the 5 and 2.5 percents but cap it to the housing guidelines or use $.85 base and 3 percent annual increases, whichever is higher. Mitchell said the staff is trying to keep the rents affordable. If the city stays with the existing agreement and Castle Ridge can justify over 6 percent rent increases, at some point Castle Ridge will be beyond the guidelines. There is no cap in the existing agreement. Mitchell said he feels the negotiated agreement accomplishes the goals of keeping the rents affordable and keeping Castle Ridge Associates in this. Mayor Stirling moved to direct staff to pursue finalizing the existing negotiations as per the summary 1 through 4 in the memorandum dated August 24, 1988; seconded by Councilwoman Fallin. Councilman Tuite said Castle Ridge is saying they are losing money but are making a proposal that says they can live with everything but paying the 3.9 or they will have to walk away. Councilman Tuite said this is a project that will turn around and start making a lot of money for Castle Ridge Associates. Councilman Tuite said he does not have a problem with the housing 14 Continued Meeting Aspen City Council August 24, 1.988 9~- -~° Kathryn S. ch, City Clerk 16 Continued Meeting Aspen City Council August 24, 1988 authority taking over this project in the next few years. The housing authority has the ability to control the rents better themselves. Mitchell said based on the discussions of the bankruptcy, there is a chance the city could lose this project and it could go free market. Mitchell said the city's main goal is to make this affordable. If Castle Ridge makes money and keeps it affordable, that doesn't matter. Mayor Stirling said he does not mind that Castle Ridge Associates stay in as long as the property is maintained and kept up. All in favor, with the exception of Councilman Tuite. Motion carried. Councilman Tuite suggested the city could say the Castle Ridge Associates they could get out in 3 years time and the city would suspend the land lease payments. Councilman Tuite said because of the tax laws and depreciation, there is a period where Castle Ridge could get out and not suffer tax consequences. Then the city could get the project back and be in control. This could be another options in the negotiations. Mayor Stirling moved that Mitchell pursue this recommendation of Councilman Tuite's and run with it if it looks like it works, and if not, come back and consult with Council; seconded by Council- man Tuite. All in favor, motion carried. Fred Gannett, city attorney's office, brought up the $15,000 claim from the Mother Lode. Mitchell told Council he has directed CIRSA to settle this. Mitchell said the city will spend more money defending this suit than settling it. Gannett told Council the city has been put on notice of intent to sue on behalf of Nancy Poe if the Red Roof closes. Ms. Poe says she is entitled to $100,000 commission and has engaged an attorney. Mayor Stirling said the key is was she the procuring cause. Gannett told Council all information to date suggests she was not; she provided a conduit that information flowed. Gannett said once it got to the next person, it was disseminated to DeBoer. DeBoer, who lives in Aspen, thought it was a good idea and approached the city. Gannett said the city's position is that Nancy Poe was not the procuring agent. Mayor Stirling said information is not a procuring cause. Mayor Stirling said he sees this claim as specious. Paul Taddune told Council the city judgement in the Trans America case. tunity to get $10,000 to $15,000 from Council adjourned at 7:35 p.m. 15 ha s won a motion summary There might be an oppor- Trans American. ~~a e`,C~etJ ~~~~