HomeMy WebLinkAbout2007-0111 Study Session Packet
CITY OF
ASHLAND
CITY COUNCIL STUDY SESSION
AGENDA
Thursday, January 11,2007 at 5:15 p.m.
Council Chambers, 1175 East Main Street
1. Discussion of Mt. Ashland Asset Appraisal
2. 6:15 p.m. Executive Session to discuss pending litigation pursuant to
ORS 192.660 (2)(h)
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in
this meeting, please contact the City Administrator's office at (541) 488-6002 (TTY phone number
1-800-735-2900). Notification 72 hours prior to the meeting will enable the City to make reasonable
arrangements to ensure accessibility to the meeting (28 CFR 35.102-35.104 ADA Title 1).
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CITY OF
ASHLAND
Council Communication
Study Session - Discussion of Mt Ashland Asset Appraisal
Meeting Date: January 11, 2007 Primary Staff Contact: Lee Tuneberg ~
Department: Administration E-mail: tuneberl@ashland.or.us
Contributing Departments: Public Works - Finance Secondary Staff Contact: Paula Brown
Approval: Martha Bennett E-mail: brownp@ashland.or.us
Estimated Time: 2 hours
Statement:
Council approved hiring an appraiser skilled in the ski industry to evaluate the assets held by Mt Ashland
Association to assure compliance with the 1992 contract regarding Minimum Liquidation Value as it relates to
restoration of the ski area.
This study session is an opportunity to review the study with the appraiser and discuss what other actions may be
necessary .
Staff Recommendation:
1. Council accept this report after raising any questions it has.
2. Council identify what additional information is desired.
3. Council indicate to staff what next steps if any, are desired for this process.
Background:
The City Council approved an agreement in 1992 relating to the operation of Ski Ashland resort area and that
agreement included a process for assuring compliance with maintaining adequate asset value to do restoration
work should the resort cease to operate. The attached document was created by the process established in ,the
1992 agreement and is meant to help provide the assurance desired.
The original contract allowed for a 30 day process but those who developed that time frame did not allow for the
complexity of such a review, the level of expertise needed and the potential that qualified, independent appraisers
may have other projects that would delay the report.
In October 2006 Ted Farwell of Winterstar Valuations, Inc. was hired to manage an appraisal process per the
contract. Mr. Farwell is available to answer any questions you may have.
The contract provides a method for calculating the Minimum Liquidation Value. It includes creating a ratio by
dividing the current year CPI-U in January by the Base CPllndex Figure from January 1992. The numerator is
from the current year and the denominator is the January 1992 index which is 138.1. January 2007 would not be
available until February so we used the prior January index. The index from January 2006 is 198.3. Thus, the
ratio is:
198.3/138.1 = 1.44
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This rate (1.44) times the original contract estimated restoration amount of $200,000 equals $288,000 for 2006's
restoration value.
If the actual liquidation value of leased property as determined by the appraiser is less than 110% of the
restoration value ($288,000 x 110% = $316,800) then the lessee pays for the appraisal. If the actual liquidation
value is less than the $288,000 then MAA will have to deposit the difference in a trust account per Section 7.1.1.
For further clarification on what is appraised to arrive at the asset valuation, consider the following areas in the
contract
Section 7.1.3:
Section 2.1.4:
Section 2.1.1 & 2:
The appraisal is of leased property.
The contract defines leased property as permit property and equipment.
The contract defines permit property as real property and improvements held under the
Forest Service Special Use Permit.
The contract defines equipment as the personal property on Exhibit B showing Buildings,
Equipment and Improvements (no land listed and excluding any office contents outside
the permit area).
Section 2.1.3:
As you read the report please understand that the numbers generated are based upon using an orderly disposal
(liquidation) process. This process is thought to best represent what would happen if operations cease and thus it
seems most appropriate to use it to estimate minimum liquidation values.
Other points of consideration are:
1. At this point Ashland holds no MAA money in trust so there is no amount to add to the appraisal as
referenced in sentence one of Section 7.1.3 or in the original"Ski Area Trust Fund" referenced in
Section 2.1.7.
2. The study identifies the liquidation value to be approximately $672,700.
3. The report estimates $921,500 to remove chair lifts and $243,000 for deconstructing the buildings.
4. The aggregate demolition and removal of $1,164,500 can be viewed as part of the estimated restoration
costs of the area if required by USFS leaving little or no money (depending on removal requirements) for
other restoration work required.
5. The calculated deficit of $491,800 is contingent on the work required by USFS or the level of restoration
desired by the City beyond what may be required.
The report is based upon a physical inspection of assets in October. Changes can and do occur monthly that will
impact the total value. New assets are purchased, others are retired and others devalue based upon use or
moving into another calendar year or season. Also, the January, 2007 CPI-U index will require recalculation of
the target ML V. The cost to do this level of review is approximately $20,000.
Even though the report shows a deficit of $491,800 between total asset value and total removal costs, it appears
that MAA has complied with the 1992 contract by maintaining assets valued at a minimum of $288,000.
The report also indicates that the formulae employed to assure adequate minimum asset value to cover
restoration costs is inadequate if USFS requires ski lift removal as part of restoration. It also raises questions
regarding the sufficiency of assets after demolishing or deconstructing the buildings to provide monies for other
restoration work.
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This suggests the need for USFS to identify what restoration work would be required to identify what liability the
City may have.
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Related City Policies:
City of Ashland Lease with Mt Ashland Association
Council Options:
This item is for discussion only. Council should give staff direction to return at a regular Council meeting with any
items that require formal Council action.
Attachments:
Appraisal report
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