Economic consultants for Sun Valley Co. and the city of Ketchum have crunched the numbers and concur that a 138-acre River Run base village at the south end of Ketchum would mean millions of dollars for the city government.
After costs are taken into account, Ketchum would take in $5.5 million during construction from 2010 to 2023, with $450,000 earned annually afterward, according to the city's consultant, Randy Young, of Washington company Henderson, Young & Co.
But the details are what worried Ketchum City Council members at Thursday night's meeting with the resort owner.
"The devil is in the details," said Councilman Larry Helzel, adding that the council must protect taxpayers from unnecessary risks.
Other councilmembers also emphasized a concern about making sure the city's risks aren't too extreme. The big question being, what details of Sun Valley Co.'s plans would have to change for Ketchum to be stuck with a bill larger than its income for adding 138 acres into the city?
Young advised the council that the city's previously mentioned revenues from approving the annexation are based on 100 percent of the proposed value of the project coming to fruition.
However, Young said that if only 81 percent of the proposed project's value is built, the city would break even. Any less, and the city would lose money. But less money for Ketchum would also mean less money for Sun Valley Co.
"If it doesn't work for you, it doesn't work for us," City Councilman Baird Gourlay said to Sun Valley Co. representatives.
Young and Sun Valley's economic consultant, RRC Associates, based their calculations on the same assumptions for the base village: 520 dwelling units—everything from cabins to condos—at an average price of $1.5 million each, 180 hotel rooms at an average rate of $492 a night, and 35,000 square feet of retail and restaurant space. And both consultants relied on Sun Valley Co.'s assumption that the land's annexation into the city would take place this year, and they'll have designs ready to start construction by 2012, with everything built by 2023.
This construction timeline is particularly important to the city's Urban Renewal Agency, which will collect property taxes from the development at a rate of $25.3 million during construction and $3.6 million annually after that.
< <
Cities create URAs to rehabilitate deteriorating areas in a city and promote healthy development. State law allows the use of property taxes to finance URAs, but only increases in property taxes—starting at the time of a URA's creation—due to development or inflation are handed over to the URA.
The catch is that state law restricts the life of URAs. Ketchum's will end in 2030, meaning that if the base village's construction is stalled a few years, the city could stand to lose millions.
Construction timing particularly worried Gourlay.
Sun Valley Co. had said that the hotel would have all 180 rooms built for business by 2014.
"Aren't these numbers a little optimistic?" Gourlay asked, adding that the resort would only have about 16 months to build the 110-foot-tall hotel.
Wally Huffman, director of resort development, admitted, "Even for me."
"It makes me nervous that you're not tying to certain things," Gourlay said, "but you want the city to tie to them."
A few other questions and risks worried the council, such as Sun Valley Co.'s request to set aside half the URA money earned from the new development for financing part of the cost of building parking structures within the base village.
Councilmembers weren't bothered by the idea but said they were concerned that this obligation could keep the URA from undertaking other projects.
Andy Gunion—project manager for East West Partners, contracted by Sun Valley Co.—cleared this up by saying that half the money coming in would go to the URA for whatever it wants. He said Sun Valley Co. wouldn't demand all 50 percent of the URA earnings up front.
Another unusual nuance of the annexation would be a real estate transfer fee, which the Ketchum Planning and Zoning Commission suggested months ago in its deliberations. The fee would take a percentage of each base-village property sold and hand it over to the city for future community housing in town. The estimated total value of base village properties is $787.5 million. Sun Valley Co. has agreed to the fee and has asked for it to be 0.25 percent, or a total of $1.9 million.
However, Sun Valley Co. isn't onboard regarding a request by locals and Ketchum's Parks and Recreation Department for a three-acre soccer field on the property. Proponents say the city is short on active parks.
"This project cannot support the city's shortfalls and be all things to all people," said Sun Valley consultant Becky Zimmerman of Design Workshop.
Looking at the big picture, council members expressed interest in a public-private partnership with the resort owner for the annexation.
"I'm greatly encouraged by tonight's proceedings," said Councilman Curtis Kemp at the end of Thursday's meeting.
Trevon Milliard: tmilliard@mtexpress.com
