Three weeks for a Hail Mary pass. Do you believe in miracles?
by Mark Reaman
Admittedly hoping for some sort of miracle, the Crested Butte Town Council on Monday voted to delay by three weeks what looks like a significant postponement of the second phase of the Paradise Park affordable housing project.
A unique contractual situation has impeded Bywater Development LLC from obtaining the $6 million bond—or 120 percent of the project’s estimated cost—that the town has required as part of the deal. That in essence led the town staff to advise the council at the July 15 meeting to pull the plug on Phase 2 of the project. That phase of the project would have allowed local businesses to purchase 10 units of deed-restricted affordable housing. Local individuals have committed to the 15 affordable units in Phase 1 that is already underway and being constructed at lightning speed.
“Right now we don’t have what we consider to be an adequate bond,” community development director Michael Yerman told the council. “So the staff recommends putting Phase 2 of the project on hold. We can rebid the project this fall and break ground next spring. At this time we can’t recommend moving forward with Phase 2.”
Basically, because the deal between Bywater and the town involved the town transferring its property to Bywater in order for the developer to obtain financing, the owner of the property, Bywater, was also the developer/general contractor.
But the town requires a bond to ensure completion of the project. Such bonds are basically a common way for municipalities to guarantee a project gets completed. If for some reason the developer walks away, the town could cash the bond, take the money and complete the project. To be both the property owner holding the bond and the contractor doing the work gave pause to bond brokers, who could foresee a possible incentive to not do the work.
According to Joel Wisian of Bywater, that “complicated factor in the circumstance we created is making it difficult to get the bond you’ve been asking for at 120 percent. There was zero interest by bonding firms in that scenario. The second factor is with the transfer of the land to us, I’m essentially bonding myself since I’m the property owner and the contractor. So it is not a normal course of business. I wasn’t aware of that when we went to market.”
Wisian said he was ahead of schedule and under budget with the first phase of the project that has begun by Rainbow Park. He said he would like to continue with both phases of the project but was comfortable with whatever the town decided.
Town attorney John Sullivan agreed with Yerman that the town should not move forward with the second phase at this time.
Responding to councilman Will Dujardin, who asked if lowering the required bond from 120 percent of the project’s estimated cost to 100 percent would help, Wisian said it might. “But the bigger issue is the general contractor/ownership issue. That is very unusual. It is a relationship that doesn’t exist in the bonding community.”
Wisian brainstormed that perhaps the town could issue the bond to cover itself and he would pay for the cost of the bond.
“We haven’t heard of or looked at that option,” said Sullivan. “Before considering it, we would need to look at it.”
Yerman said if the project didn’t stay on schedule and an ordinance transferring land to Bywater wasn’t approved by the first meeting in August, the project would likely have to be postponed.
Wisian agreed. “That would make it late August and we need to let our crews know before then,” he said. “If those units are rebid this fall, the pricing on those 10 units would have to be revisited.”
“When we learned about this in executive session [earlier in the July 15 meeting], my heart just dropped out,” said Dujardin. “But I feel we have to protect ourselves.”
Wisian suggested the council set the public hearing for the Phase 2 land transfer for the August 6 meeting in the hope that he could figure out a solution. “It gives me more time to see if I can work something out and you vote then. If nothing can be in place, vote no,” he said.
“Every piece of information I have is that no bond can happen in two weeks under the circumstances,” said Sullivan.
“Not in the amount that is necessary,” added Yerman.
The $6 million bond would cover both the first and second phases of the Paradise Park project. Bywater currently does not have a bond in place but Yerman said, given the speed of the construction in the first phase, Wisian’s ability to produce a $2 million bond by the end of August would be sufficient to protect the town’s interest in Phase 1.
Town manager Dara MacDonald said that being a public entity put the council in a place that should keep them from taking major risks. “Joel has done an outstanding job going vertical with this initial phase,” she said. “This is an atypical situation and I know it is a hard situation to walk away from. But I’m not comfortable having the town go in to Phase 2 unprotected.”
“What is the harm in setting for public hearing?” asked mayor Jim Schmidt.
“The primary concern in extending the public hearing is that it becomes an emotional issue with the public to the council,” MacDonald responded. “Some people are losing their dream with this and they will appeal to you to make it happen no matter the risk.”
Yerman said the town in the past has taken the risk on about six units at $1.7 million, and said, “But this bond is for $6 million. I am super bummed about the circumstance too. Affordable housing is very important in the community right now but so is softball and so is emptying the trash cans on Elk Avenue. I don’t want to put all the chips we have in one basket.”
“We need to continue to be creative in addressing affordable housing, like this town has always been,” said MacDonald.
“We were lined up to buy three of these,” said Kyleena Falzone of the Secret Stash and Bonez. “Can the business owners try to come up with a way to cover the bond money? I’m not sure how but there are people out there willing to help. It may take a miracle but I’ve had a few miracles in my life.”
“If something doesn’t come up, if there is no miracle solution, then vote it down at the next meeting,” said Wisian. “But give us those couple of weeks. There might be a miracle.”
The council voted 7-0 to allow three weeks for the manifestation of such a miracle.
“I’ll go work hard like I always do and see if we can figure something out,” promised Wisian, who immediately huddled with Falzone and some members of town staff during a break in the meeting.
The council will consider the situation again at the August 6 meeting.