Bigger picture implications with town finances

By Mark Reaman

The cost of moving and renovating two existing buildings, one an A-Frame on Sopris Avenue and the other an accessory dwelling unit (ADU) in Gunnison, into affordable housing units in Paradise Park made the idea too expensive to pursue. The Crested Butte town council on Monday, April 1, decided to not make the move that would have cost the town about $1 million for the two structures.

“The costs of the projects came in higher than anticipated,” said Crested Butte housing director Eric Ganser. The A-Frame was estimated to cost $662,000 and the ADU $482,000 for the move, the foundation work and the needed upgrades to the structures. “The staff recommendation is to forgo these opportunities.”

Town Community Development director Troy Russ gave a shout out to both property owners that approached the town about using the buildings that will now be demolished. “Both delayed their projects to try and help us, so kudos to them,” he said.

“As an architect I was worried that the cost would be prohibitive,” said councilmember Kent Cowherd. “Sometimes it is more expensive to renovate a building rather than have a new build. That sort of cost for a shell doesn’t make sense.”

Mayor Ian Billick said the situation gave context to the town’s bigger picture. “We are taking a big step forward to finance affordable housing by issuing debt for 17 units. That is a big step for us financially,” he said in reference to the council decision to enter into a $10 million Certificate of Participation this year. “We are now having to be more limited with our money. The Whetstone project that could bring more than 200 units might need some financial help from us. The parking issue could use some capital help for things like an intercept lot at Brush Creek. I’m signaling that I’ll be less supportive going forward for this type of one-off project.”

“You are saying we need to tighten our belts?” said councilmember Mallika Magner.

“Yes. I see the need for a more conservative approach,” said Billick noting that projects like the recently completed Big Mine skatepark might not be possible in the near future. “In my two-and-a-half years on the council it has been easy to say yes to projects. But that time could be coming to an end.”

Councilmember Beth Goldstone said council should not immediately close the door on all potential future opportunities, noting that there could be good situations. “There is, for example, value in converting existing (free-market) units to deed restricted units for workforce housing,” she said.

“It is sobering realizing we can’t just do these projects quickly,” commented Magner. 

Ganser said since she has been with the town, five such relocation opportunities have presented themselves and only one has been completed. “A 20% success rate isn’t bad for this type of project,” she noted.

Practicing due diligence while pursuing $12 million bonding 

By Kendra Walker

During their March 5 meeting, the Crested Butte town council agreed to continue with High Mountain Concepts (HMC) as their general contractor for the upcoming affordable housing units in Paradise Park and next to Mineral Point. Based on the construction pricing coming in significantly higher than the original estimates and with higher interest rates, the council agreed last month to pursue bonding for $12 million that will allow for the construction of 20 units to be completed by 2026 while preserving some vacant land for future projects. The council also asked staff to conduct appropriate due diligence to decide whether to move forward with HMC or issue a new Request for Proposals (RFP) and rebid the project for an alternative contractor in the hopes for better pricing while maintaining the goal of beginning construction phase 1 this summer.

Through a previous RFP process, the town had selected HMC to be the development partner on the project in spring of 2022. The council had approved HMC based on the team’s extensive local experience in building workforce housing, construction capacity, solid relationships with local subcontractors and project approach. 

Housing director Erin Ganser presented the council with two options, to continue with HMC as selected or to issue an RFP. 

“The primary benefit to staying with them through construction is that HMC has been deeply involved in the design of the project giving them insights to the nuances of the project, including the value-engineering of the heating systems,” she said in a memo to the council. “Additionally, they have established relationships with local subcontractors and are positioned to start construction as soon as the debt is issued.”

Ganser expressed concern that reissuing a bid could impact the project’s timing, and there is no guarantee savings will be an outcome of the process.

“Staff price-checked HMC’s bids with two other local general contractors who indicated that they were reasonable for this market,” she said. “Going out to bid takes time. We’ve already worked with subcontractors through the bidding process and are cued up to be able to say yes this is a go if we choose to reissue a bid. One of my main concerns is us wanting to start construction beginning of June and being late into the pre-construction season.” 

She continued, “Another thing we lose by changing the process is the team has been at the table through the design process. That awareness and that knowledge is certainly valuable.”

Other than reducing the total number of units in the project from 32 to 20 to arrive at a total development cost that can be financed with a bond and funded from the available sources in the town’s affordable housing fund and rental revenue, HMC’s scope of work has not changed. To date, the units have BOZAR approval and are positioned for building permit review.

“Sometimes when projects don’t work as originally planned, you can end up with project that’s not quite as designed and sort of piecemealed,” said councilmember Jason MacMillan. “Is that what’s happening, or do you feel confident with where you’ve landed?”

“I don’t think we’re piecemealing anything,” said Ganser. “These are some of the first buildings coming though under the new code. We’re doing new systems now and that took some work and time, looking at what are the different ways to skin the cat. Now we know what our options are and how we finance this. We’re zipping up plans based on where we’ve decided to go for phase 1, and we’ll continue to look at alternatives that would be beneficial financially.”

“I really appreciate you doing the due diligence,” said mayor Ian Billick.

The council unanimously agreed to staying the course with HMC through construction.

Ganser said that conversations are moving forward with the town’s public finance advisor and legal counsel to begin the process to issue debt by the end of May to ensure that construction of phase 1 can start this summer. 

20 rental units in the future

By Mark Reaman

After reviewing three alternatives for how to finance the construction of 32 potential affordable housing units in Paradise Park and next to Mineral Point, the Crested Butte town council agreed at the February 20 meeting to pursue bonding for $12 million. The bonding option will allow for the relatively immediate construction of 20 units to be completed by 2026 while preserving some vacant land for future projects.

Through a request for proposals (RFP) process, in 2021 the town had selected High Mountain Concepts to be the development partner on the project. But construction pricing based on approved design plans came in significantly higher than the original estimates. That, plus higher interest rates, resulted in a funding gap too large to finance for the town. 

Town staff went back to the drawing board and came up with three options for council to consider. The first was to use existing cash flow to slowly build 28 units over the next 22 years. The second alternative would be to sell some town-owned property, including lots currently expected to be deed restricted on the free market, to offset costs and build 15 units by 2028. The third alternative was to borrow money to fund 20 units with competition in 2026. That option results in the highest project cost given a 5% interest rate on the bond and the need to dip into the town general fund for about $900,000. 

But it delivers the most units the most quickly and the town could potentially sell the units after the 20-year bond is paid off.

 Each alternative would utilize most if not all of the town funds earmarked for housing, so initiatives like the GreenDeed and GoodDeed programs will be put on the back burner. The first two options would build for-sale units while the bonding alternative relies on rental income to help pay the bond that ultimately would end up with an $18 million cost to the town for the project over 20 years. The $18 million price tag is reduced by $6 million in rental income, and the town also anticipates an opportunity to sell the units for approximately $10 million after bond obligations are met. 

“Every year we wait, my instinct is that we lose buying power through inflation,” said mayor Ian Billick.

Councilmember Kent Cowherd expressed some concern that the bonding option eliminated the planned four units for town employees.

Housing director Erin Ganser said that while the town can only borrow about $12 million, how that money is used is still up for discussion.

Councilmember Jason MacMillan asked if the density of the lots was being maximized, and community development director Troy Russ explained that the density of the units being built in Paradise Park are defined by the available water taps installed to service each parcel.

“To me it makes the most sense to bond and build the units quickly,” said Ganser. “Town declared a housing crisis and this action addresses that. I don’t see a benefit in dragging it out.”

“That option stands out to me over the other two,” agreed Cowherd. “They are all a bit disappointing that we can’t do more. If interest rates come down, can we do more?”

“I would not bank on interest rates dropping back to three-and-a-half percent in the next five years,” replied Ganser. 

“If we choose any of these, we lose future flexibility if anything else comes along,” said councilmember Anna Fenerty. 

Ganser confirmed that tap fee subsidies for ADUs, along with the GreenDeed and GoodDeed programs, would fall by the wayside. She said those programs would be put on hold until the bond is paid off or possibly refinanced after 10 years.

“My sense is that building a unit is guaranteed while there is no guarantee GoodDeed will convert a unit,” said councilmember Gabi Prochaska.

“I favor the third option,” said Billick. “There is not a 21st unit unless you build the first 20. Getting units out the door and stretching funds makes it easier to perhaps re-ask voters to help with affordable housing funding. Option two is not worth considering in my opinion because you end up with less property and less units.”

“Option one feels safe but I’m all about economies of scale,” added MacMillan. 

“I agree the 2045 timeline with that first option feels safe, but ridiculous,” said Prochaska.

“I too am not super excited about any of these, but I like option three the best,” said councilmember Beth Goldstone.

“So it is clear we all hate 7% interest rates and $550 a square foot building costs,” quipped Billick.

He suggested given the radical difference in project costs and unit numbers that town should probably issue a new RFP for the 20-unit proposal.

Ganser relayed that the Mineral Point low-income housing project would begin construction this summer and be ready to “lease up” by the end of 2025. She said the first 10 of the proposed 20 units could come online about the same time with the remaining 10 units being done and ready for people to move in by the end of 2026.

Ganser said that while the 20 units would be deed-restricted rentals for 20 years, after the bond is paid off they could be deed-restricted for-sale units. “It’s a long game,” she said. “It is not the rosiest of analyses, but we can’t self-finance these types of projects like we have in the past.”

Staff will start the official process of working with a bonding firm to issue the debt by early June. 

Focus on making the community more livable

By Mark Reaman

The most recent iteration of the proposed Whetstone affordable housing project south of Crested Butte has increased the number of proposed units by about 10%, going from 231 units to 255. 

The project development team along with the property owner, Gunnison County, conducted a community design workshop last fall and took many of the suggestions from that workshop to build upon the already approved Sketch Plan. The updated plan was released this week. Aside from adding 24 units, the latest proposal includes space for a multipurpose turf area within the community park, refinements to the roads and snow storage areas, a reduction in the number of buildings in the center of the site, an increase in parking spaces and floor plans favoring functional storage space.

In a press release, the developers said the changes illustrate the focus on livability in Whetstone “which centers on affordability, stability and sense of community.”

One of the county’s point people on the project is assistant county manager for operations and sustainability John Cattles. He said the architect was able to add units to the project through some design efficiencies with floor plans that added a few units to each of the multi-family buildings. He said the footprint didn’t change much from the Sketch Plan. 

“We chose to bump a section of the buildings in the central area to three stories which breaks up the architecture and is efficient and cost effective from a construction standpoint,” he said. “Units are about the same size as we originally estimated but the plans are more efficient than we had estimated in dedicating space to units instead of hallways, stairs, back of house, etc.”

 With the new configuration the project now contains five studio apartments, 64 one-bedroom units, 106 two-bedroom/two-bath units, 38 two-bedroom/one-bath units and 42 three-bedroom units.

Cattles said some of the townhouses will have patios and gardens. “The townhomes along the west boundary are oriented back-to-back so they create a shared parking area on one side and shared patio garden on the other,” he explained. “As far as storage, we heard clearly that it was important for our lifestyle, so each unit has a significant storage area built into the unit and we are designing shared storage areas in the multi-family buildings where lockers can be assigned to units for larger items like tools, bikes, kayaks, etc.”

 Cattles indicated that the proposed turf area is sized for youth soccer based on recommendations from the Crested Butte Parks department. It is not a full-sized field but is appropriate for younger ages. 

Cattles said there are still buildings located along the highway, but planners are using the property to guide the locations. “It’s the same number of buildings along the highway,” he said. “Again, we’re trying to find a compromise between using buildings to help create a sense of arrival and to slow traffic, and we are also using topography and berms to limit the perceived height of buildings.”

As for street refinements, Cattles said the developers took several ideas from the fall workshop. “The street profile varies. In some places we have no curb for easy snow removal where we can offset sidewalks, and in other places we have a traditional curb and gutter where we have high traffic and sidewalks attached to the street,” he said. “We made streets as narrow as possible while complying with standards required for fire access. The west road has seasonal parking on one side so we can store snow in the winter and other roads have parking on both sides but a snow storage area at the end. There are a lot of details and balancing of competing issues that we ‘refined’ to find the best solution.”

The latest plan includes 428 parking spots but 21 are seasonal to allow for some snow storage. Cattles said it works out to about 1.7 parking spaces per unit. 

Snow storage spaces are distributed throughout the 13 acres. Several areas are designed for large piles of snow that may be moved from other spaces that get tight. The lower part of the property will have a large area where snow can be hauled and stored on-site for big snow years.

It is anticipated that the Preliminary Plan will be submitted to the county planning commission in February. In the meantime, talks will continue with the town of Crested Butte over how to supply the development with water and sewer utilities.

Balancing the obvious need and the financial realities…

By Mark Reaman

The Crested Butte council reviewed the draft 2024 budget for utilities and affordable housing, and it appears housing projects could slow down while utility bills would see a minimal increase.

High interest rates along with higher than expected construction cost estimates appear to have tapped the brakes on how fast some planned deed-restricted housing might come online. 

“While we are confident in the projected expenses in the Affordable Housing fund, the timing and possible revenues are still being examined by staff with help from financial advisors with Stifel (a bond company consulting with Crested Butte),” a staff memo to council stated at the November 20 meeting. “We plan to return to council in the coming months with some options to complete build out of Paradise Park and the TP parcels along Butte Avenue.”

The memo indicates that most of the funding in the 2024 housing budget is allocated for predevelopment expenses for Paradise Park and TP-3, the affordable lots along Butte Avenue, as well as the start of construction on nine deed-restricted units in the Paradise Park neighborhood.

Mayor Ian Billick again brought up his request to get a figure on the overall real costs for affordable housing. He has asked for years to see numbers showing the value of building new affordable housing units versus converting free-market units to deed-restricted units. He mentioned not just the construction or purchase costs but the broader costs to the community in terms of things like impact to schools and parks. Converting an existing unit has less impact on the community infrastructure than building new units that add to the population.

Town manager Dara MacDonald said the staff can estimate those numbers “but there is no cookie cutter solution.” She mentioned that sort of analysis is being conducted for the proposed 231-unit Whetstone affordable housing project south of town. 

“I would still love to get the numbers in general,” said Billick. 

Staff is still exploring how to reduce costs for Paradise Park units with developer John Stock of High Mountain Concepts who told council earlier this year that actual costs were about 60% higher than initial estimates. Councilmember Jason MacMillan mentioned that interest rates and inflationary costs were making the cost of building new units expensive. Given that, he indicated it might not be the time to rush into building major projects. Billick acknowledged the interest rate dilemma and said hopefully they would come down within the year. MacDonald said the interest rate and cost escalations made projects less financially doable but understands the need for the physical units. 

The Mineral Point apartment complex located at Sixth and Butte, which will service low-income residents in the same category as residents of Anthracite Place, is still expected to start construction next spring. Staff is exploring if there is interest in local government entities like the RTA and school district to purchase affordable housing to be built along Butte Avenue across from the Gas Café.

Staff was clear that the revenues for the Affordable Housing Fund come primarily from commercial building housing fees and a 7.5% excise tax on vacation rentals, but those funds will fall short of expenses. Given that, council should expect that some money might be transferred from the capital of general funds to supplement funding for housing initiatives. Town has received significant grant monies to help offset costs.

Utility bills

As for utility bills, the town is expecting to implement a 2% increase in monthly water and sewer fees. 

Town is coming off a major increase in its monthly charges for water and wastewater services. In 2023 the town was able to increase revenues to the needed 30% to balance the cost of operations including new debt service payments for the major Wastewater Treatment Plant project currently underway, but staff indicated there is still a funding gap. Given that, staff is recommending to continue slowly and incrementally adjust rates to facilitate the ability to absorb variables within future operational budgets and “discourage any need for large scale rate increases.”

The 2% suggested increase would take the base water rate from $46 to $46.92 and the base sewer rate from $59.50 to $60.69.

“I have always and continue to express my dismay at the ever-increasing utility costs but met with the staff and understand the need to keep our necessary infrastructure going,” said councilmember Mallika Magner. “I just want to be careful of the impact to our citizens.”

“I was just really glad it was only a 2% increase this year,” noted Billick. 

The council is expecting to adopt the 2024 budget at the December 18 council meeting.

Seeking better ways to provide workforce housing

By Mark Reaman

It has been seven years since the Crested Butte Affordable Housing guidelines were updated, so the town is in the process of reviewing and potentially revising the regulations. Public input is being solicited and a meeting will be held on Thursday, November 9 to gather more ideas and feedback.

Town had sent out a survey to a variety of people associated with the affordable housing program, including owners of deed restricted units, owners of property with Accessory Dwelling Units (ADUs), owners of residential units in commercial buildings and those on a list of people interested in future housing opportunities. 

Thus far, feedback is asking the town to re-examine several things including how affordable housing lottery tickets allocations are determined. Some want longevity in the valley to count more than the number of years of local employment, for example. Other issues brought up include how to not strictly prohibit an increase in equity with deed restricted homes, looking at what constitutes a “full-time” worker in the valley and relooking at who might qualify to buy a larger unit.

Most survey respondents said workers should be the focus, but the general feeling was to not exclude local workers from eventually retiring in their deed restricted homes.

It was clear that the lottery process has been stressful and sometimes confusing. Carving out essential workers was considered by some to not be necessary since a common theme was that “all workers are essential.” And the prohibition of owning property like a house outside the county was also raised as being too strict.

Crested Butte housing director Erin Ganser said since guidelines were last approved, it’s time to review them. “The current guidelines were adopted in 2016 and are due for an update,” she said. “We’re updating to incorporate industry best practices, guidance for new housing programs, and to make the guidelines more easily understood and implemented. The update is part of our larger effort to better address the housing crisis.”

Ganser said the feedback has provided interesting thoughts from those in the system. “The feedback was great and included some interesting ideas. A big takeaway for me includes the need for additional education. There is a lot of misunderstanding of the existing guidelines and deed restrictions, as well as the role of the guidelines vs. deed restrictions, roles of the Town vs. GVRHA, etc. I think it is safe to say that some shortcoming or another, either with the deed restriction or guideline process, is identified in every lottery,” she admitted. 

Originally, the town’s housing programs were conceived as a stepping stone into market rate unrestricted housing. However, Ganser said that scenario is, in most cases, not realistic given the increased cost of market rate housing. “Many respondents want to see an increase in the allowable appreciation, which would let them build wealth and improve their chances of buying a market rate home,” she said. “However, increasing the appreciation cap also makes the home more expensive and less attainable for the next deed restricted buyer. Traditionally, government-sponsored housing is in the business of building homes, not building individual wealth. This is an important discussion topic for council to consider.”

Ganser said now is the time for people to get involved and provide feedback. She said the town wants to hear the good and the bad of the program. “We’d really love to understand the aspects of the programs that cause personal hardship; does the program need more flexibility around allowances/processes for an owner’s absences from a deeded home?; should the years of local employment be based on cumulative vs. consecutive; what are suggested changes to the lottery ticket allocation (i.e. less or more weight on the longevity of work history), change the weight given to right sizing units with households? All policies have shortfalls and lotteries are not a perfect method of awarding a critical need such as housing. We understand that and are open to suggestions to make the programs and policies better,” she emphasized in an email.

More information is posted on the Crested Butte “Get Involved” web page under the Housing Guidelines Update. Everyone is invited to the public meeting that will be held November 9 at 5:30 p.m. at Town Hall. As an incentive, pizza and refreshments will also be served!

Town and contractor looking for alternatives

By Mark Reaman

An enormous increase in the actual costs associated with potential affordable housing units in Crested Butte’s Paradise Park is putting the project in jeopardy. The town council learned at its September 5 meeting that anticipated costs for the first phase of the proposed units came in 62% higher than preliminary estimates. 

With partner High Mountain Concepts (HMC), the town has plans to build out the remaining town-owned lots in Paradise Park with 18 units. Phase I includes five units: two duplexes and one single family micro house. Originally the first phase was to start this summer and be completed within a year followed by subsequent phases to complete build out.

As is standard for a Request for Proposals, High Mountain Concepts had made its bid based on architectural concepts and not detailed construction drawings. In a memo to the council from Crested Butte housing director Erin Ganser, it was conveyed that “ultimately, when based on detailed construction drawings and energy modeling, the costs exceeded the preliminary estimates.”

Ganser told the council that “the new construction reality is impacting all capital projects.” 

“We’re all at the mercy of higher prices up here,” added HMC’s John Stock.

Mayor Ian Billick pointed out that the cost increase was significantly more than inflation associated with building. “The staff should perform diligence and work with High Mountain Concepts to gather the specifics,” he said. 

Town manager Dara MacDonald said John and Karen Stock of HMC are willing to dig into the numbers deeper to help town understand the gap, but there hasn’t yet been the time to do that. Town may consider rebidding the project. 

“Our original bid was based on what we did before in both CB and Gunnison,” said John Stock. “But those numbers have changed with concrete for example. There are also complications with the site.”

“We understand there are no final answers here right away, but we’ll regroup and get back with Erin,” said Karen Stock.

Specific bid numbers were considered proprietary for HMC and not released in case the project is rebid.

“You and John are very community based and I have faith in you,” said Billick. “We appreciate you working with the staff.”

“It’s a partnership and long-term relationship,” said Karen.

Ganser said the town is looking at other models for the housing, including opportunities to secure grant funds to help close the gap. “We will also explore whether a third-party investment model could produce rental housing in lieu of homeownership units,” she said. “Regardless of who owns the housing units, they will all have deed restrictions.”

Councilmember Anna Fenerty asked if the project could scale down and perhaps build duplexes on the lots instead of triplexes. 

Ganser suggested a better strategy would be to go slower and still build triplexes but do fewer of them “and save the dirt” by keeping some of the lots open for future affordable housing construction. 

“I agree with that,” said John. “We are all shocked with the costs and some of the complexities with some of the lots.”

The council held an executive session to discuss the situation in private.

In light of the significant cost increase, the council directed staff to do additional due diligence on the construction pricing to ensure that it is reflective of the market.  Additionally, next steps will include explorations of other funding sources to help close the gap and more discussion will be held with the council to determine priorities for the overall capital budget.

Prioritizing support for critical and core workforce

by Mark Reaman

While no new affordable housing goals were clearly defined by the Crested Butte town council at a one-hour work session on March 6, council does want to continue looking at alternatives that could guide them into the future of workforce housing in town. While the town is involved with several upcoming housing projects, the discussion focused on philosophy.

The work session included the annual review of the town’s housing direction, along with a look at what the five-year planning goals, set in 2018, have achieved and what goals should be set from here. Generally, it appeared council wanted to prioritize future housing opportunities for town employees, followed by employees of special districts and quasi-governmental agencies like the RE1J school district, Mountain Express and Crested Butte Fire Protection District.

Crested Butte community development director Troy Russ said staff was actively working on addressing the housing issue on many fronts. In a PowerPoint presentation to the council, it was acknowledged that there was no “silver bullet” to rectify the workforce housing shortage and that the response should be comprehensive in scope.

Crested Butte housing director Erin Ganser asked council to specifically define what the council’s purpose was in addressing housing so staff could come back with a draft goal statement and suggested success measures. She asked, for example, if the goal was to support the current local economy, to grow the economy, to strengthen the community, or was it to make the economy and community more resilient?

Town manager Dara MacDonald asked the council to state the intended purpose of building more units. “To what end is the action we are taking?” she asked. “What is the council’s goal?”

“Do we want to be surgical to achieve specific ends or just do more housing in general,” added Ganser.

Councilmember Chris Haver indicated he was more comfortable with mostly prioritizing housing for the general workforce.

Mayor Ian Billick said he was not in favor of being too specific with restricting new workforce housing. “I worry about flexibility,” he said. “I’d be concerned about creating spaces targeted to today’s specific needs and those needs could change in five years. I would want flexibility and control.”

“If we just build, build, build and we’re not sure how we do it judiciously, we instead end up just growing, growing, growing,” said councilmember Gabi Prochaska. “There are some jobs that are more important than others here. Some jobs fill real needs while others provide for comfort.”

“In a normal free market, it would fix itself,” said Russ. “But the market is broken here. So, the question is how far do you as a council want to go? Some intentionality with housing is needed just because of your limited resources.”

“I’m nervous to say what the community needs in five years,” said Billick. “That is why control is important. For me personally, keeping town employees is important, followed by employees of special districts. Then the general workforce. It is financially prudent to help the town and special district employees. Otherwise, we all end up having to support them through higher taxes needed to attract or keep them here.”

Billick made clear that he was most comfortable prioritizing town employees for workforce housing when the units in question were paid for by the town. He was less comfortable putting town employees in front of the line if the town had not contributed financially to the unit.

“I agree with the need for future control and flexibility,” said councilmember Jason MacMillan. “We should also be doing some land banking for future housing. Partnering with the community like with the school district and Mountain Express is also important.”

“The ultimate goal is to have affordable housing to whatever extent is necessary,” said councilmember Anna Fenerty.

“We have tools to keep housing affordable,” said Ganser.

“What other additional tools can we use?” asked Fenerty.

“We can come back to you with measures and strategies for the council to consider,” replied Ganser.

“There are both financial incentives and regulatory measures available,” added Russ. “Both can be used to help fix the shortcomings of the market.” He mentioned the town staff would seriously consider eliminating on-site parking requirements for accessory dwelling units (ADUs) if the council thought that was a good incentive.

“That’s where we need to know the council priorities,” said MacDonald. “You can’t do it all.”

“The goal for me is to strengthen the community so that the people living and working here can grow,” said councilmember Beth Goldstone. “Putting more support to people who make the local economy function. The current deed restrictions focused on local income makes sense. We want the people who make the local economy work to be able to live here.”

“So is the council priority on town and other government or special district employees?” asked MacDonald.

“Do we all want to preserve town employee housing?” asked Fenerty. The consensus from the rest of the council appeared to be “yes” as they cited the staff goal of expanding from the current 19 units owned by town and allocated for town employees to at least 28 units by 2029. Billick said he would be in favor of going beyond that 28-unit goal.

Fenerty pointed out some of the other goals presented by the staff were beyond the scope of the town and would need collaboration with nearby government entities like Gunnison County and Mt. Crested Butte. She also said having tangible enforcement and compliance strategies in place for deed-restricted housing was important.

“If we can curate various housing options it will better support various parts of the economy,” noted MacMillan. “A two-bedroom apartment might be good for a couple with one kid but when they want to have a bigger family, they should be able to move to a larger place. Otherwise, they might have to leave the valley.”

“If people are in, they should have the opportunities to stay in,” said Billick.

MacDonald informed the council that less than half of the current town staff lived in free market housing. “Having housing options is a critical component to attract employees,” she emphasized.

Staff will bring council some options for how prioritizing town employees and other critical workers would work. 

Presales, middle income rentals, using reserves

By Mark Reaman

Rising construction costs along with rising interest rates have thrown a bit of a wrench into the finances of Crested Butte’s proposed workforce housing projects on TP-3 at Sixth and Butte and the build-out of the town-owned parcels in Paradise Park. As a result, the Crested Butte town council on Monday, November 7 indicated they were ready to take some steps that reduce project risk, bring in some upfront cash and expand who might be renting some of the deed restricted units while continuing forward with the project.

Unlike market rate development, affordable housing developments cannot simply raise home prices to offset higher construction and interest costs. Sales prices are capped to help ensure that the housing is affordable, and that the buyer’s monthly housing costs do not exceed 30% of a household’s income, a metric that is set by HUD. As monthly interest payments increase, the sales price has to go down to stay within affordability limits. The double hit of higher construction costs and lower home sales revenue has resulted in a $8.4 million gap on what is estimated to be an $18 million project. The initial gap was estimated to be about $1.3 million. 

Crested Butte housing director Erin Ganser indicated to council that that there are numerous strategies to close the gap.

Council agreed to determine if there was serious interest in preselling 10 of the approximately 30 units in Paradise Park and the so-called TP-3 parcel to governmental or quasi-governmental entities like Mountain Express, the local school district, fire district or Gunnison Valley Health. Staff indicated preliminary conversations with such partners resulted in the likelihood that 10 potential presales were probable.

Council is also amenable to allocating two parcels containing approximately six units to High Mountain Concepts, the selected general contractor of the development. Those parcels would be deed restricted as workforce rentals but would not have income restrictions. HMC is doing similar housing in Gunnison, particularly at the Lazy K and Van Tuyl developments. HMC would be given the land and fees would be waived so those units could be built affordably and rented to middle income earners.

The council agreed that the town was willing to fund construction on the project to avoid big interest charges and subsidize between $2 and $2.5 million of the project out of the town’s general fund reserves. The town staff said the fund balances were hefty enough to absorb that draw down. 

Mayor Ian Billick said the town reserves were sitting in the bank gathering low interest rates so this could be a better place to invest public money. He also noted that the excise tax on vacation rentals is expected to bring in between $750,000 and $1 million annually so it could pay off that subsidy relatively quickly. 

John Stock of High Mountain Concepts said another way to bring down the money gap was to build smaller units. “They can be designed to fit what is needed and reduce the space. Not every house needs a big sitting room,” he said. “We found it was hard in Gunnison to sell the three-bedroom units. People want smaller places. Our 600-square-feet houses were our fastest sellers.”

“Because we are using public money, they not only need to end up being affordable but not including income limits in the deed restriction is troubling to me,” expressed councilmember Mallika Magner.

Town manager Dara MacDonald reinforced town attorney Karl Hanlon’s position that the council could control the deed restriction on every unit but Stock, or whoever the developer was, might not then be interested in building and managing them.

Stock emphasized every unit would include a deed restriction for workforce housing. “But there are issues with every income level. The hospital wanted to buy four units at Lazy K but the deed restriction states the places have to be occupied by people making less than 140% of AMI. There aren’t the people that make under that for GVH to put in there. So we are talking to the city about adjusting the restriction.”

“I’ve seen it at the school where there is a need for higher income rentals,” said councilmember Beth Goldstone.

“As people in senior management positions retire, they won’t be leaving their homes so there isn’t much of an available market for such renters,” said Ganser.

Magner still expressed concern about not including income limits as part of the deed restrictions.

“Higher income workers can’t find housing either,” said councilmember Gabi Prochaska.

“I personally know people making more than 200% AMI that are housing insecure,” said Billick. “There seems to be a need for rentals for all income levels.”

“But this would allow a surgeon coming to town that makes $500,000 to rent a unit,” said Magner.

“Technically, yes,” responded Ganser. “But the idea in that case would be that it provides a landing pad and that too is valid. Most people then want to move on and buy something. I am worried we can get too worried about people gaming the system when the research shows it doesn’t happen.”

“I want to avoid reducing the square footage to the point density is lost through fewer bedrooms,” said councilmember Jason MacMillan.

“The bed count or unit count wouldn’t change,” assured Stock. “But you can make decisions based on the economics of what you are trying to achieve.”

“Maybe with smaller square footages you could build more units?” asked Billick.

“We would love that, and it is possible in some cases,” said Stock.

As for preselling some units, there was some concern that having a person’s housing tied to specific employment was not the best scenario. This was a particular concern of councilmember Anna Fenerty.

While agreeing with the concern, Billick said presales were an extremely cost-efficient way to get the project moving. “Given the financial gap, I’m a fan of presales,” he said. “I’d be comfortable with 15 of them if the demand was there.”

Councilmember Chris Haver said he did not want to be in the position of selling the units to private businesses like the town did with some Paradise Park units. “But I like the idea of having rentals for those type of essential jobs whether it be for entities like the school or the hospital,” he said.

Selling to governmental or quasi-governmental entities basically means the units go to essential workers,” said Ganser. “And there’s more of a compliance process involved with tenants than with private businesses.”

Magner and MacMillan said based on the interest and follow through at the latest Paradise Park housing development, there was some concern the town might build the units and no one would want to live in or purchase them if a recession hit the area. Stock suggested since no one had a crystal ball to predict the future that slowly phasing in the units was the best option.

Town staff will bring a predevelopment agreement with HMC to the town council at the next meeting on November 21. Ganser said that agreement will outline high level deal points for the project and confirm that town will fund predevelopment and construction costs.

The preliminary development schedule includes a community open house to share preliminary designs in mid-January and submittal of the designs for the first set of buildings to the Board of Zoning and Architectural Review (BOZAR) at the end of January. The first phase of construction is expected to start in May 2023.

Town says negotiations are ongoing

[  By Kendra Walker  ]

The future of the 22-unit Homestead affordable housing development in Mt. Crested Butte is still in limbo. It’s been one year since Homestead Housing LLC developer Lance Windel went in default of his contracts with the Homestead homeowners, and the project has been at a standstill ever since. The town of Mt. Crested Butte is working with a Denver-based attorney on next steps and town representatives say they are “diligently working with lawyers to resolve the matter.”

This week, town manager Greg Sund told the Crested Butte News that negotiations are ongoing between the town and Windel’s attorneys, but he did not provide any additional information regarding the timeline of the negotiations or next steps due to the confidential nature of negotiations. The town is working with special counsel Joe Rivera of Murray Dahl, Beery & Renaud.

Sund did share that the town’s Community Development Department has issued a notice of permit expiration requiring cleanup of the entire site along with fencing certain areas of the site in the interest of public safety. “The site has been declared a public nuisance and the building has been deemed to be unsafe,” he said. “The notice is sent to the owner who is responsible,” said Sund, but he did not know the timing of the notice or deadline for the required cleanup. 

The News reached out to Windel for comment but did not hear back as of press time. Windel had previously said last year that he wanted to consult his attorney before signing the Homestead contracts again, due to issues with the supply chain, material delivery and lack of contractor availability. 

Windel owns the property and according to the town’s contract dated November 21, 2018, if Windel is in default, the town could “exercise its option to purchase,” “exercise its right to assumption” or “exercise its right to specific performance.”

Sund confirmed that the contract does not include a performance bond or clause regarding completion of the project, as what was done with the Paradise Park affordable housing project in Crested Butte.

Mayor Nicholas Kempin also spoke with the News. “Although we are not in litigation at the moment, litigation is still possible which is why unfortunately there’s not a lot of information we can share,” he said. “We realize the hardship this delay has caused. Folks with the town are doing everything we can on the Homestead front, as well as looking into other possible projects we could do so we’re not waiting on Homestead. The whole thing is unfortunate, nobody wants to be in this spot. But things are happening, and we are in ongoing negotiations.”

The town council has an executive session with Rivera to discuss Homestead scheduled for Monday, November 14.