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But city officials maintain that the neighborhood has started to come back--thanks in large part to public investment in the area. Yates opened Five Points Plaza in 1988; a Colorado Department of Motor Vehicles office serves as its anchor tenant. Since then, two banks have set up branch offices in the neighborhood, and a hardware store went in. Just last month, KBDI-TV, one of the metro area's two public-television stations, moved into a new $2.5 million media center at Welton and 29th streets. The media center, too, was partially financed with city economic-development loans. And this fall the Regional Transportation District is scheduled to start up its new, $116 million light-rail line, which will link Welton Street's restaurants and other businesses to thousands of potential customers in downtown Denver.
For Lysaught, the use of public money for the Rossonian project is a no-brainer. He's seen what good economic-development loans can do, he says, ticking off a quick list of MOED projects: The Mayan Theater, the Imperial Chinese Seafood Restaurant on Broadway, La Coupole Cafe in lower downtown. None of them, he says, would have been possible without the city's help.
Neither would the Rossonian. "No private developer would have done this," says Lysaught. "But we think that it's money well spent." And since 1990, Denver has loaned corporations Yates controls almost $2.2 million to buy and refurbish the property--including a $715,000 loan approved just this spring by the city council. The building and a few surrounding parcels are the city's only collateral and have a market value far less than what Yates has already put into the project.
The Rossonian, meanwhile, isn't even finished, though Yates initially set a target date of May 1993. The DHA moved in on the second and third floors in December, but the ground floor remains little more than a shell. Lysaught says it might take another $500,000 in city loans to convince a private nightclub operator to refurbish the space and open for business.
Predicting whether economic-development projects will be boons or boondoggles is often impossible, says Richard Bingham, a professor of urban studies at Cleveland State University in Ohio. "You just never know until after it's over whether these things will work," adds Bingham, founder of the journal Economic Development Quarterly.
But Bingham says the Rossonian and projects like it should be judged over the long term, with consideration given to how much private development they generate in the surrounding area--even if they initially lose money. "You have to look at more than just the building," he says. "You have to look at it in a reasonable time perspective--three to five years--and look at what happens in the neighborhood."
Lysaught says that, compared to other city development projects, the Rossonian is a safe bet. The DHA has signed a five-year lease that brings in almost $12,000 a month in rent, enough at least to service the building's current MOED loans. And because DHA is a government agency that relies on taxpayers for its funds, there's no danger it will miss payments or go out of business. "The Rossonian is far less risky than our average deal--far less," Lysaught says. "I'd put it in the upper 10 percent" of MOED projects.
It wasn't until he actually walked through the inside of the Rossonian that Tom Yates realized what he was getting into. The year was 1990, and Yates, a real estate developer and insurance executive, was thinking of buying the historic building from the City of Denver. But his tour of the structure showed him just how ambitious the project would be.
Hundreds of pigeons were roosting on the third floor, coming and going as they pleased through holes in the roof. Bird droppings had piled up ankle-high in some places. Down on the second floor, fires lit by vagrants had badly seared the floor, the walls and the woodwork. Where the old jazz lounge had been there was a large collection of bottles discarded by winos.
"There were some people who said, `You're better off tearing this thing down,'" Yates recalls. "It looked like a building you ought to push over, inside and out. It was kind of like a haunted house."
American Woodmen's and the city worked out a deal whereby Yates would acquire the building and surrounding parcels with a $350,000 MOED loan. Using money from additional city loans of $1.8 million, Yates then hired controversial Denver contractor King Harris to do the construction work on the project. Last year MOED raised eyebrows when it agreed to sell the politically connected Harris a two-story building next door to the Rossonian--the building that Shelley Rhym used to live in--for only $8,000.
City councilman Ted Hackworth says he was uncomfortable with what he considered an abnormally low price. "I thought it was a giveaway," he says. Lysaught and Yates, however, defend the sale and suggest that the cost of renovating the structure would counter any conceivable increase in value due to its proximity to the newly remodeled Rossonian. Harris, who in the past has said he does not speak to members of the press, did not return a phone call from Westword.
The controversy over the sale to Harris didn't interfere with construction work on the Rossonian. Today the hotel has been transformed. Workers gutted the interior and installed all-new plumbing, electricity, walls and carpeting. An elevator and two stairwells were added. Because the space proved too small for Yates's plans, he also used city loan money to buy a one-story liquor store next door. Yates added two stories on top and then incorporated the whole thing into the Rossonian project.