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May232009

ISSUE # 33 ... ONE DEAL OVER THE CUCKOO'S NEST - ASPEN STYLE

DRIVING AROUND, LOOKING FOR "HISTORY" 

"I must be crazy to be in a loony bin like this."
 
R.P. McMurphy (Jack Nicholson's Character.) 

 

 

In 2000, Amy Guthrie, the City's Historic Preservation czarina, noticed a house at 312 W. Hyman while doing a "windshield survey" of Aspen properties which might have "historic character." She saw the house as potentially historic, as it vaguely resembles several local buildings mimicking the European "chalet-style.   

The Historic Preservation Commission (HPC) took a look. In addition to the original building permit from 1954 that establishes the structure as a pre-fabricated kit house, 312 W. Hyman Ave. is only a dolled-up ranch-style house, with some fancy trim added, and HPC's review -- marked "FINAL" -- determined that 312, much to the relief of the owner, did not have the historic significance to warrant involuntary (forced upon the owner) designation.

Shortly thereafter, owner Jordie Gerberg obtained a demolition permit from the city, but in the end only trimmed off the home's phony Swiss façade, a decision he surely regrets to this day. (Unfortunately for Gerberg, Guthrie kept in her files the list of rejected, non-qualifying properties which became one element of the City's much-feared "secret list" upon which Emergency Ordinance #30 was based in 2007.)

"DETRIMENTAL INTERFERENCE?"

In 2006, Jordie sought to sell the home at 312 W. Hyman Avenue that he'd owned since 1986 in order to help his brother with medical expenses. Through word-of-mouth, the house was quickly under contract -- the buyer committing to a $3.5 million purchase price for the 1536 s.f. home on a 6000 s.f. lot.

However, during the due diligence period, the buyer discovered that the house was again in the City's cross-hairs, unbeknownst to Jordie, who was in possession of the "FINAL" decision from 2000. (The City claimed that they could review the house again since it had been 5 years, never mind the "FINAL" report from HPC in 2000.) The threat of "involuntary historic designation" scared off the buyer, as designated properties have severely restrictive redevelopment regulations, and that alone destroyed Jordie's deal. Jordie suddenly lost not only his $3.5 million buyer, but also significant value in his home!

Ooh! Such a mess for the boys at City Hall -- their antics destroyed a private and valuable contract during due diligence (in legal-speak: "detrimental interference"), and devalued the property at the same time. It was no longer possible to designate the house historic AND bring in another buyer at the same price to make good with Jordie. How would the City circumvent a potential lawsuit?

HISTORIC EMPLOYEE HOUSING?!

City staff employed the other hot-button issue for City Council - Affordable Housing - to make 312 W. Hyman historic. They recommended that City Council buy the house from Jordie for $3.5 million, designate it historic, and redevelop it into affordable housing. The report to Council cited that the house was suddenly now on a duplex lot, included 2 free market units (although it is and has always been a single-family residence, albeit with a small attached "bandit unit" apartment), and as such, the City could add 2 carriage houses on the property, and sell as many as 8 Transferable Development Rights (TDRs) with an estimated value of $2 million. (Note: TDRs can be sold to a developer who then uses the development rights to increase the density of a project at another location.) SOLD! To the City in March 2007, using $3.5 million from the dedicated affordable housing fund, generated by the RETT! The anticipated taxpayer SUBSIDY for the completed affordable housing project at 312 W. Hyman was over $4 million ($1 million per employee unit)!! Simply ABSURD!!

City Manager Steve Barwick defended the purchase as just the cost of buying property in Aspen. The Aspen Times reported Barwick saying that as the cost of real estate in Aspen continues to rise, so will the cost of subsidizing affordable housing. "We're in the process of redefining what subsidies look like," Barwick said.

No one from the City came to inspect Jordie's house or the alleged "duplex lot" during the due diligence period, aside from a woman checking for lead-based paint.

YODEL-LAYDEE-HOO

By May 2007, Guthrie sent now city-owned 312 W. Hyman through HPC a second time. She was told "it doesn't qualify" a second time, too. The National Register of Historic Places standards were not met either. Not to be out-done again, however, it was back to City Council, this time armed with a brief history of the home submitted by the original owner and a 3-page historical embellishment written by staff, complete with photos of Guido's waitresses. (You can practically hear the yodeling.) Preservation zealots on Council fell for the sales pitch and over-rode HPC's two-time decision. Guthrie finally got the house at 312 W. Hyman historically designated! And we, the taxpayers now own the historically-designated 1950's rancher, alas without its tacked-on replica Swiss-style trim.

SWEET LEASE-BACK

Ahhh, but what about the affordable housing? There was no inspection during due diligence according to Gerberg, so they were unaware of the complex undertaking and massive expense necessary to bring 312 W. Hyman up to code. In the end, the City apparently didn't want to spend the money. So who lives there now, in the 1536 s.f. city-owned, Aspen-Pitkin County Housing Authority-funded 3-bedroom/2-bath faux chalet? Jordie. He and his apartment tenant lease back the house for $3000/mo in rent to the City. The definition of "affordable housing" continues to evolve at City Hall!

Meanwhile the asset depreciates, houses no employees, and has an enormous negative return on investment. Yet another example of the City's plan for "land banking." Even the Pitkin County tax assessor valued the house at only $2.856 million (2008 valuation), presumably due to the restrictive nature of the historic designation!

Imagine if the City had merely used the presumed interest on the money spent ($3.5 million at say, 4%, or $140,000 x 2 years = $280,000), to subsidize rents for employees. We could have helped about 12 employees to the tune of $1000 monthly. Instead, no employees in need of housing benefitted in any way.

TIME TO UNLOAD IT
Despite its designation, the house is not historic according to HPC (twice). It is not on a duplex lot and cannot practically be configured to accommodate the City's proposed 4 units of affordable housing. The City's 2006 plan simply does not work on that site! Never did. Newly historically-designated 312 W. Hyman was obviously a disastrous purchase for the City at taxpayer expense, so it should be no surprise to learn that on December 15, 2008, it was listed (and remains listed today) for sale -- for $3.5 million.

SWAP YOURS FORMINE? A FAIR TRADE?
Enter neighbor Peter Fornell, who represents the property across the street at 301 W. Hyman Ave -- a 3200 s.f. 4-unit teardown apartment building

 

-- with an offer for the City: I'll trade you my building on a 3000 s.f. lot for your house at 312 W. Hyman on a lot twice the size.  

(Just how did this gem escape the "windshield tours," given its "Modern Chalet" style?) Fornell's building is on the southwest corner of Hyman and 2nd (across from the Aspen Ice Garden), is not historic, and is uniquely surrounded by city-owned land. Fornell says the properties are of equal value, and his may be worth more because of potential affordable housing development opportunities. Sounds like a good "out" for the City, right? Well, not if you do the math.

Fornell's property was purchased in Sept. 2006 for $1.7 million. The City purchased 312 W. Hyman 6 months later for more than TWICE that price. The offer, as we understand it, was to trade properties, throw in up to 8 TDR's from 312 W. Hyman (valued at about $2 million)to Fornell, and be rid of 312 W. Hyman once and for all. Never mind that the City would only receive a $1.7 million tear-down while Fornell gets a $5.5 million package. How's THAT for a return on investment of taxpayer dollars?!!

 

Early this year, Jordie entered into discussions with the City regarding the possibility of buying back his home. In his view, the City should do the right thing since he feels strongly that the house was wrongfully designated and purchased under false pretenses. Jordie offered $2.8 million for the property (itsthen assessed value) with the caveat that the historic designation be lifted and never considered again, but the City was reportedly only focused on the potential land-swap with Fornell.

Swap or Not?
Today we heard that the proposed "trade" is now a dead issue. Some speculate that the appraisals in fact showed the obvious disparity in the value of the properties.

The story seems far from over, and we will definitely report on the next chapter. In the meantime it seems clear that 312 W Hyman may be the City's mini-BMC.
(Click Here to Read about BMC). Buying property without appraisals, inspections or realistic analyses of practical redevelopment is just a bad idea no matter the state of the market. 


As expected, The Red Ant has some strong-held conclusions from the story: 
 

-Once again, the City should not be buying property without considerable due diligence and planning for practical and economical uses and value.

-Affordable housing funds are precious and should be used for dedicated purposes with thoughtful consideration for the greatest efficiency in housing our workforce. (This would likely NOT include conversions of historic preservation properties.)

-The idea of $1 million+ subsidies per employee housing unit is absolutely ridiculous and offensive, when the City could create quality housing for many more people at far less per employee.

-Involuntary historic designation of 20th century homes is far too "Big Brother" for The Red Ant. It only serves to unduly and unfairly restrict citizens' private property rights and their right to "quiet title."The public response in the AACP surveys seems to agree.

-Voluntary historic designation (as it stands today) can bring its own problems.This action ironically serves to enable owners of voluntarily designated properties to increase the mass and scale of their historic homes/buildings, despite the possible negative impacts on their neighbors. The City grants millions of dollars in benefits per property for the sometimes-questionable designation.

-Homeowners should not have to suffer having their homes in continuous limbo with the government -- remember the concept of "quiet enjoyment" of your property?

-Furthermore, didn't we all just learn in the May 2009 election that the voters take seriously their voice in selling City-owned property?

(When asked whether voter approval would be necessary to approve the sale or exchange of this piece of City-owned property -- which may be mandated by law -- Scott Miller, City Asset Manager, responded, "That has yet to be determined." In other words, like the decisions to amass a shamefully over-priced land-banking portfolio, the City's actions may deserve watching fairly closely by the public.)


The Ant salutes Bob Rafelson, who wrote to the Aspen Times in 2006 in response to the City's actions that killed Jordie's real estate sale. "Council needs help recognizing character. We historically preserve buildings to sustain Aspen's character. But those choicemakers really need help. Witness the commotion about Jordie Gerberg's Swiss chalet, as preservable as a Wal-Mart cuckoo clock."

 




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Reader Comments (3)

what a farce this whole thing has been!
Mini-BMC, you hit it on the head!
Why is this Amy Guthrie still allowed her job w/the City?;
hasn't she pulled stunts even on her own property(s)?

May 23 | Unregistered CommenterEdelweiss

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