Carriage Hills project could rescue CCH
Published: Thursday, August 15th, 2013
As Custer County Housing (CCH) slowly digs its way out of a hole caused by 10 years of questionable management, one of the biggest causes of its ultimate downfall—the failed Carriage Hills project in Hermosa—may ironically be the project that could give it a faster boost.
It’s possible the project, if completed, could provide the revenue boost needed to pay off much of its debt. It is also speculated that this reason, along with a perceived need for elderly housing in Hermosa, precipitated the formation of the project.
The project was to be 29 acres of a mix of commercial and residential lots, with the anchor being an assisted living facility. The formation of the project began in 2003, when CCH agreed to buy the land on a contract for deed basis for $262,000 from Nadine Courtney. The proposed land is in the northern part of Hermosa just off 3rd Street.
CCH made a $40,000 down payment on the land, as did local developer Mike Tennyson. CCH defaulted on contract soon after. Eventually Tennyson wanted out of the project, and Judith Bishop loaned CCH $40,000 to pay him back.
A total of $195,000 in unsecured private money was loaned to CCH for the project, including the Bishops’ money, $40,000 from the Rittberger family, $25,000 from James Nickels and another $8,500 from Polly Preston. When interest is figured into the equation, around $372,000 is owed to those who loaned CCH money for the project.
In 2004, the idea was pitched to First Interstate Bank, which at the time was First Western Bank. There was never a formal application submitted, but informal talks led the bank to believe the project was too big and cumbersome to loan money toward.
“That’s when Carriage Hills went into intensive care,” said CCH chairman Leonard Wood. “It’s been downhill ever since.”
Tennyson was initially involved in the project but eventually wanted out after investing $40,000 in the project. Wood said former CCH director Connie Gorsuch then borrowed $40,000 from Bishop to pay back Tennyson, and John Rittberger invested $40,000 in 2007 to develop a Tax Increment Financing (TIF) district for the project.
Gorsuch continued to borrow money, including from Judith Bishop, to make payments on the land until it finally went into default. Today, CCH owns only the TIF for the project, while Marvin Bishop was able to get a lien on the land and now owns it.
In the meantime, an $80,000 bill was run up with Joe Lux, a Rapid City attorney who was working on the TIF, and a $54,000 tab was piled up with Advanced Engineering of Rapid City for engineering work on the project.
Another $241,000 was spent on pipe to expand utilities for the project, but when the project collapsed due to the lack of financing and sour economy, the pipe was never used. That brought on a lawsuit by the contractor, Rapid Construction, on the basis that Gorsuch had promised the business it would be general contractor for the project. The lawsuit remains unsettled.
“She had the (CCH) chair issue a purchase order for $241,000 worth of pipe, knowing full well she couldn’t pay for it,” Wood said.
Wood said Gorsuch then went on to solicit others for loans, but to his knowledge, no one approached agreed to loan the money.
“If they would have scaled that project down, it would have flown,” CCH vice chairman Dennis Moulton said. “The thing was way out of the scope. She had just the board and herself.”
In Custer, the Trail View, Horseshoe Park and Landover Three and Four units were developed with the help of a bridge loan through the bank for construction phases and then the bank helped CCH to secure U.S. Department of Agriculture Rural Development loans and United States Department of Housing and Urban Development loans to continue payment on those projects. There was no such help for Carriage Hills and possible suitors for loans felt there were too many moving parts involved in the project.
“Custer County Housing is not a developer,” Moulton said. “It was a dead horse from the start.”
Today, all the debts surrounding the project add up to around $1 million, depending on the interest total, some of which dates back to 2005 and is compounded.
Both Moulton and Wood agree if the project is to ever move forward, it will have to be on the backs of private parties. CCH has no money to lend for the project, nor does the federal government. Several developers have declined to move forward with it, as has CCH’s new managing entity, Metroplains Management, citing the lack of medical facilities in Hermosa.
Still, the two believe it could be made to work and said CCH would work with developers to use the TIF that CCH still owns to help in any way possible.
“The sewer line is there, the water line is coming in and electricity isn’t that far away,” Wood said. “It’s a nice piece of property.”
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