ISSUE #6: KURA WILL COST US A LOT OF $$$ WITH BLUEBIRD 2

Where is the increment in their tax increment mandate?

Mar 29, 2024

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PARKING ALERT: Save the date—April 15

The City staff will present a proposed Parking Plan to the Ketchum City Council at their meeting on April 15 at 4 pm at Ketchum City Hall. They will take public comment on that plan. I expect it will be made available to the public on April 12th when the agenda for the Council meeting is released. Look for a link to it in the City’s Heard on the Street biweekly email, and it will also be posted here.

They say, “We get the government we deserve.” I disagree. In my experience, we get the government we let happen to us. We need to use our voices better at election time, but we should also be using them to make sure that our elected and appointed officials know when they have lost the thread of connection with the people they are supposed to represent.

As I highlighted on Tuesday in Issue #5 and at the P&Z Meeting, we don’t have to choose between parking and housing—we can have both. But only if we insist on it.

Once we replace parking with housing, we will permanently lose that critical component of commercial viability in the commercial core.

NB: Thanks to Mr. Riley, our City Administrator, for letting me know about this meeting.

JOINT City Council / KURA Meeting on Monday, April 1 at 4:15 pm—PLEASE ATTEND

Two key things will happen at that meeting. One looks like a foregone conclusion. The City and KURA will each approve the award of the construction contract for the Main Street rebuild. That cements the permanent loss of the 25 parking spots on Main Street that our businesses say are vital to their viability.

I had proposed that before the irrevocable loss of the 89 spots between Main Street and the Washington Lot, we try living without those spots during a peak demand period to see the impact. It seems like common sense to aim first and shoot later. The City Council and KURA are on the shoot first aim later program.

The second thing…

What’s with this KURA Subcommittee?

At Monday’s meeting, KURA staff wants them to appoint a sub-committee of three members to review the development plan. Why? Why can’t the other four commissioners do their job on the largest expenditure in KURA’s history?

If they delegate their responsibility, I hope they appoint the less-conflicted members. That rules out Chairperson Scovill, who is on the record saying KURA shouldn’t pay for anything else but housing. (Has she read the URA statute?) And then there is Mr. Lipton, who doesn’t live in Ketchum (but seems happy to spend our money) and is on the record saying he is “sick and tired” of the locals complaining about parking and this lot was always going to be housing. The two City Councillors are inherently conflicted as they are responsible for Bluebird 1 and were in on the parking lot sale to KURA for housing in the first place.

That leaves us with a subcommittee that should not exist, but if it does, should be comprised of Casey Burke, Tyler Davis-Jeffers, and Mason Frederickson. But wait…they are all in the real estate business. KURA doesn’t have a single member who runs a retail business in the retail center KURA is supposed to be de-blighting.

Which explains a lot. As I explain below…

KURA is supposed to raise the tax base in its district—is KURA achieving that goal?

As I noted in Issue #4, KURA is supposed to be in the urban renewal business, not the public housing business. But I failed to explain the important part: how they are supposed to raise money, spend money, and then pay it back. Here you go…

KURA is supposed to raise money via its borrowing authority and use that money to invest in roads, sidewalks, and other infrastructure, with the express goal of raising the tax base in its district (essentially the commercial core of Ketchum). In other words, it is supposed to generate a return on its expenditures by investing in things that increase the total taxable value of the urban renewal district.

Of course, Ketchum doesn’t need that at all, given the rapid rise in our property values, so the very premise of having a URA in Ketchum is, to my thinking, a scam. (My guess is that it was done to find a way to raise money to get around the City's bonding referendum requirement.) However, KURA doesn’t meet this fundamental requirement with Bluebird 2..

As I said, I like Bluebird 2's financial structure but not its location (because of its poor allocation of our scarce financial, location, and character resources—see Issue #5 for more on that). By using WRCHT to develop the property, KURA can set work requirements for the tenants. So this is actual workforce housing, not just low-income housing like Bluebird 1.

When KURA invests in a project, the property value of that project is frozen for the life of KURA (set to expire in 2030). All incremental taxes of that property go not to the City, BCRD, or the other taxing entities that get a piece of the property tax but to the KURA to recompense it for the expenditure it put into the property that is supposed to increase its value and thus the long-term tax base of the district. When KURA expires, that tax increment then benefits the City and other taxing entities.

In the case of the Washington Lot property, that’s not gonna happen. KURA is going to spend up to $8mm, and there will be no property tax increment on the residential improvements on this land. Why not? WRCHT is a non-profit. The building they put up on this lot won’t pay property taxes because it is owned by a non-profit!

There will be some tax increment over its current use. The City’s, and now KURA’s, ownership of this lot has generated zero property taxes from it for over a decade. Any commercial improvements made in the WRCHT project will generate some property tax. However, it will be a fraction of what this property could have generated if it had been put to its highest and best use by a for-profit developer.

Will this tax increment be enough to pay for this $8mm investment of taxpayer resources? Why has this never been discussed at a KURA meeting?

My thought is that the general tax base of the commercial district is rising regardless of KURA’s actions. KURA is getting a free ride off that. The rising tax base, which has nothing to do with them, covers their poor “investment” decisions. We don’t need a KURA at all.

What’s with this KURA Sub-Committee?

At Monday’s meeting, KURA staff wants them to appoint a sub-committee of three KURA members to review the development plan. Why? Why a sub-committee? Why can’t the other four commissioners do their job on the largest expenditure in KURA’s history?

If they are going to delegate their responsibility, I hope they appoint the less-conflicted members. That would rule out Chairperson Scovill, who is on the record saying KURA shouldn’t pay for anything else but housing. It makes me wonder if she has read the URA statute. And then there is Gary Lipton, who doesn’t live in Ketchum (but loves to spend our money) and is on the record saying he is sick and tired of the locals complaining about parking—so much for an open mind. The two City Councillors are inherently conflicted as they are responsible for Bluebird 1.

That leaves us with a subcommittee that should not exist, but if it does, should be comprised of Casey Burke, Tyler Davis-Jeffers, and Mason Frederickson. We will find out how independent this supposedly independent agency really is.

Who owns the project once KURA expires?

That is a good question. Despite having an expiration date of 2030, KURA has provided the developer with a 50-year ground lease. The presumption is that KURA will “give” its interest in the land under Bluebird 2 to the City of Ketchum.1 But it doesn’t have to. KURA could gift it to KCDC, BCHA, or some other entity. Our land, our money—we may never get it back.

Don’t you think that before $8mm of taxpayer money (plus the millions in free land) is expended, we should at least know who will own the project for the majority of its existence? This is, in my opinion, a prime example of the horrible governance that plagues Ketchum.

How Has KURA Spent our Resources?

From its inception in 2006, KURA has spent over $16mm. With the Washington project, it plans to increase that spending by up to $8mm in a single shot.

KURA has had some real winners—like the SV Visitor Center, which it bought for $3.4mm and put another $130k into, which almost no visitors visit. The City ended up buying it from KURA at a loss to KURA. KURA paid for the HAWK light at 4th and Main St. Given that it will be taken down, how did that increase the tax base?

KURA has spent money to reduce parking in the commercial core, such as the $1.2 million it spent on the 4th St Corridor and, now, the development of the parking lot it acquired from the City for $1.5 million five years ago.

City Hall has used KURA as a piggy bank. Little things like $2,500 for holiday lights in 2015. Bigger things like $71,000 to the Ketchum Innovation Center (owned by KCDC—set up by the Mayor). By my calculation, it has spent $316k on consulting fees at the City's request. How did $25,000 for a City Hall space analysis or $175,000 for a downtown plan that was never used increase the commercial tax base of our urban and blighted downtown?

As far as I can tell, with over $24 million of expenditures, KURA will have spent only $4.0mm on sidewalks ($1.5mm to build sidewalks around the Limelight Hotel). Sidewalks, unlike housing, are specifically in the mandate of a URA and something that Ketchum desperately needs investment in.

What has been the benefit to the people of Ketchum of all this spending? What tax increment has it “created” versus what would have occurred if KURA had never existed? You won’t read about that in KURA’s mandatory annual report to the public. Why not? Are they embarrassed?

KURA now siphons off over $2 million a year in tax revenue that would otherwise go to the City of Ketchum (where the money might actually go to roads and sidewalks) and other property taxing entities.

Who gets stuck holding the bag? You do.

When KURA’s life is over in six years, who will be left paying for its largesse? We, the taxpayers of Ketchum. The City tells me that KURA will be able to pay its debts by 2030. I have asked for the projections that indicate that because they don’t add up for me.

If you want to see KURA in action, they are meeting at 2 p.m. on April 15 at City Hall. I will be in Kyiv that day, so will miss the fun. I’d watch the video, but KURA doesn’t post them.

UPDATE: Short-Terms Rentals— No Enforcement? (and a clarification)

CLARIFICATION: From Issue #5, I was asked where my “up to 1000” short-term rental number comes from. It came from a local grassroots organizer's campaign to regulate STRs in Ketchum a couple of years ago. That being said, I recognize it may be high, and I don’t plan to cite that number again unless I can find more substantiation.

Tracking the number of STRs is challenging, as different units are available at different times. According to SVED2, the most recent 12-month look back shows that there were 506 unique STRs in Ketchum, and the peak on offer is about 585.3 The occupancy rate for STRs is 51%. About 1/3 of them are owned as real estate speculations.

Those are probably pretty realistic numbers. As they don’t include “off the books” STRs, they are probably on the low side.

Why doesn’t the City enforce the STR Ordinance?

I asked the City about STRs. According to their records, there are only 202 registered STRs in Ketchum. We know that the real number is much higher. This means that hundreds of STRs are flouting the registration requirement that has been in place for just over two years.

How many STRs have been fined for non-registration? In the 18 months they have been “enforcing” the ordinance, not a single person has been fined. Think about that. At least 300, and probably closer to 400 short-term units are not registered with the City for basic safety measures. Hotels are required to be registered for safety on more stringent terms than STRs. You can read the ordinance on STRs—it is hardly onerous. And yet the City has done little to enforce its ordinance. Why is that?

The City is being “nice” and trying to use moral suasion (I am paraphrasing them, but I think that is a fair assessment). Being nice is a bad strategy if two-thirds of the short-term rentals thumb their noses at the City. A cynic (okay, me) might say that they tend not to enforce things against the tourism industry.

STRs are a critical component of the tourism economy in Ketchum, and many locals make their living from the industry by renting out STRs. I have no problem with that.

The City’s Approach to STRs is Part of Aspenization

My issue is that the City’s economic development program is 100% based on tourism, to the exclusion of all else. This guarantees us a boom/bust economy, a lot of low-wage jobs, and the mass export of our children for better jobs elsewhere.

I take issue with taxing locals to subsidize tourism and the corporate welfare unwittingly provided to the tourism industry by locals.

I object to the lack of transparency, dereliction of duty, and downright mendacity with which people who are elected to represent the interests of the locals do this.