After 23 years, the Durango & Silverton Narrow Gauge Railroad will reassume ownership of a parking lot adjacent to McDonald’s on west College Drive that it sold to the city in 2001.
Durango City Council again approved the sale of the parking lot back to the railroad for $4,375,000 after final consideration on Tuesday. City officials said the sale revenues will bolster the city’s transportation budget that faces a deficit by 2026.
The city originally purchased the parking lot from the railroad to bail the railroad out of dire financial straits. Councilors have said at recent meetings the intent of the original agreement between the city and the railroad was to eventually sell the parking lot back to D&SNG.
But the parking lot is a prime piece of real estate that organizations, including the city itself, has eyed for development for years.
At one point, Durango Fire Protection District explored the idea of building its new downtown fire station on the lot. Last year, Durango STEAM Park and the railroad were the finalists in a public bidding process launched by the city to identify ways to use the lot.
Durango STEAM Park, backed by the Durango Business Improvement District, proposed a world class performing arts and conference center. The railroad, represented by Reynolds Ash + Associates, proposed condominiums and a parking garage. The process fell apart after the city learned the railroad’s proposal had been modified partway through review to exclude the parking garage.
City Manager José Madrigal said in an interview City Council had two different members when the city was accepting and reviewing proposals for developing the parking lot. It also lacked a permanent city attorney and has received more legal advice since the proposal process shut down.
Residents skeptical of the sale at a City Council meeting Tuesday questioned why the city could not pursue a public bidding process as it had last year.
Durango STEAM Park’s Bud Frank and Richard Reitz and former Durango Mayor Barbara Noseworthy urged the city to reconsider the sale of the parking lot to no avail.
Reitz and Noseworthy said the city and the railroad committed to their initial agreement on Dec. 20, 2001 – before the June 2002 Missionary Ridge Fire – which runs contrary to previous statements by sitting city councilors that the deal was struck to help the railroad out after the Missionary Ridge Fire.
Noseworthy said the railroad asked the city for help in the summer of 2001 because they had “an immediate cash need of some magnitude due to litigation the company was involved in.”
She pointed out the city’s stated rent of $100,000 per year is a fairly new rate. When the city first purchased the property in question, the railroad paid “very little,” and some years it paid nothing at all, she said.
“Eventually, the train was paying $25,000 per year. And I believe the first time the train paid the city $100,000 to rent the parking lot was in 2020,” she said. “Basically, the city provided a no-interest loan for two-plus decades to the train. Some might call this a ‘sweetheart deal.’”
She said the city’s transportation budget woes have been on the city’s radar for years; when she served on City Council, she argued for allocating more lodgers tax funding for transportation, but the majority of lodgers tax revenues is spent on marketing the city.
Noseworthy asked what deadline has been set for D&SNG to develop the parking lot, per its sale agreement with the city, which requires the railroad to develop condos, restaurants and/or retail space, to perform landscaping and to display “mutually agreeable” signage welcoming commuters into the city.
“And finally, there is the proposed sale price. This asset has not gone through an open, transparent bidding process,” she said.
She asked the city to stop the sale and carry out a public process to determine the best use for the parking lot, including consideration of retaining the lot as a city asset or pursuing a public-private partnership for development.
Reitz also said the appraisal process needs to be redone.
The city appraisal of the parking lot was $4.9 million and the railroad’s appraisal was $3.7 million. Both parties met in the middle to reach a sale price, said Mark Morgan, city attorney.
But there is no public access to the parking lot – the access is owned by the railroad – and Reitz suggested that was not factored into the city’s appraised value.
“Apparently, it was not disclosed to the appraisers because in the appraisal it states, ‘I make the extraordinary assumption that the subject property has legal and physical access,’” he said.
Reitz asked who would want to buy a lot without access for $5 million and the appraisal value is questionable.
He said the city shouldn’t approve the sale until new appraisals are available, all other information taken into consideration for the sale is “thoroughly vetted” and a new public hearing is held so the public has proper time to comment on the requested information.
Franks tried to hook the city on Durango STEAM Park’s proposed entertainment complex, offering to form a partnership between the city, Durango STEAM Park, BID and D&SNG.
“The need for such facilities is well demonstrated in this community,” he said. “We have no professional well-equipped theater. We have no conference or meeting facilities for 400 to 500 people.”
He proposed his organization would raise funds and take on debt to build improvements, BID would build a parking garage and the railroad would maintain ownership and reap the benefits without having to make major investments.
Morgan said based on outside legal advice, the city’s only real options are to sell the property back to D&SNG or to develop the parking lot itself.
“If you sell the property to anyone else, damages would flow and ... those damages would be extremely difficult to quantify, but they would be significant,” he said, referencing an opinion received by a Denver law firm hired by the city for consultation last year.
He reiterated the city is not obligated to put the property out for a public bidding process and said its only obligation is to sell the property for fair market value. If the city were to try to back out of its 2001 agreement with the railroad through a lease or a development via a third party, it’s going to get sued, he said.
“If I’m representing the railroad and the city was to do a long-term lease to somebody ... I’m going to sue you for damages. Because all you’ve done is taken away the spirit of that agreement,” he said.
City Council voted 4-1 to approve the sale. Councilor Olivier Bosmans voted “no” and said the city has enough money in its coffers to support transportation, the parking lot offers a variety of development opportunities, and there should be a more open and transparent process.
Other councilors said the city needs to honor its original 2001 agreement with the railroad.
“We signed this agreement in good faith that this was just a placeholder for them to be able to buy it back from us,” Councilor Dave Woodruff said. “If we go back on that agreement, the spirit of that agreement or in good faith, we go back on our word. And that’s what I keep coming back to.”
cburney@durangherald.com
