Ed Foran: Guest Opinion | AspenTimes.com

Ed Foran: Guest Opinion

Mayor Mick Ireland and the citys asset manager, Scott Miller, responded to John McBrides Fantasy Economics commentary (Aspen Daily News, March 17) with a furious defense of the citys $18.25 million purchase of the BMC West property for affordable housing. Certainly, affordable housing is an important priority to keep our community vibrant. However, the mayor and Mr. Miller missed the point. The issue is that the city dramatically overpaid for the property, by as much as 10 million taxpayer dollars.The city and its representatives justified the purchase price because BMC said there were offers of $20 million from developers who intended to build high-end residential townhouses on the property, before those developers realized that the zoning for such would be impossible.The fact that the city responded to a rumor of supposed $20 million offers shows navet and gullibility. This is an old trick used by sellers to generate offers that often backfire when it is determined that no such viable offer exists. In this case, the seller, BMC, hit the jackpot when the city of Aspen took the bait.It was a mistake for the city to be concerned that the site would be swept up by a developer for a high-end residential project. The site is directly adjacent to Highway 82 and across from the airport, and is therefore heavily impacted by traffic noise and jets idling prior to takeoff. The site has no such appeal for this type of use, much less zoning, which is under the citys control. In addition, the site is not entitled for this type of use; Dave Ritter, the citys appraiser, pointed out in his hypothetical appraisal the chances of receiving said entitlements were nil.If the city had taken the time to do a simple development analysis based upon the allowed uses of the property and market rents at the ABC, it would have quickly determined that no private developer could afford to pay anything remotely close to the asking price. Even if a developer had tied the property up for a free look, the developer would have quickly learned during due diligence that the deal didnt make economic sense and terminate the contract. Perhaps the biggest error of all is that the city did not have the property appraised before purchase, as a condition of the contract. Randy Gold, an MAI, SRA appraiser (the highest designation an appraiser can receive) and the principal of the Aspen Appraisal Group, stated in his December 2008 Aspen-Snowmass Market Overview, I also cannot help but wonder how the city is feeling these days about their unbelievable purchase of the BMC property in 2007 for $18.25 million they spent our money and did not even get it appraised.If the city had done its homework and been patient, I believe the property would have come back to them at a drastically reduced price. Lets assume a developer purchased the property. That developer would now be sitting on a property that is unentitled, undevelopable and unfinanceable, and the city would still have $18.25 million in its coffers, which would be nice given these difficult economic times.In these past six months we have learned that Aspen is not recession proof. Some of our local banks are foreclosing on properties for the first time in their history. We all have friends and family members who have been laid off from their jobs or are facing cutbacks. Even the city of Aspen underestimated the economic impact and is now scrambling to adjust the annual budget.If weve learned anything from the purchase of the BMC property and the subsequent world economic recession, its that we all need to be vigilant about spending. As stewards of the taxpayers investment, the city has a fiduciary duty to be wise and cautious with its property acquisitions. At the very least, all acquisitions should be subject to a market value appraisal. Even better, a citizens oversight committee, including a land planner, attorney or other real estate professional, could advise the city on the pros and cons of potential purchases and assist in negotiations.Like it or not, the city of Aspen is in the real estate development business. With the massive inventory of employee housing and its aging infrastructure, the city is developing and/or managing hundreds of millions of dollars in real estate, yet it neither possesses the process nor the expertise in place to manage such a monumental task. In the Aspen community there are some of the best real estate minds anywhere, so why not tap into that resource? The city of Aspen must be fiscally responsible to preserve the future our great community.

Ed Foran is past president of the Aspen Board of Realtors and a broker associate at Mason Morse Real Estate.

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