Council comfortable with big housing fees

Four-year phase-in of fee increase

The Crested Butte Town Council is getting closer to agreement on a heavily revised affordable housing ordinance that sets new mitigation fees.

After a 90-minute work session and further discussion during the March 19 meeting, the council is leaning toward phasing in the increased mitigation rates over a four-year period. The fee would top out in 2016 with a 20 percent mitigation rate that would add approximately $59 a square foot to the cost of building or expanding “non-residential” or commercial construction. It would start at a 10 percent rate this year or about $29 a square foot. The fee is meant to offset a portion of the cost of housing employees generated by the new development.
Among the issues resolved on Monday, the council is willing to cut the mitigation rate 25 percent for developers who build affordable units on the site of their development. The council is exempting the first 500 square feet of development from the commercial fees, as well as two “keys” or units for new lodging projects.
The council agreed to include a new concept in the ordinance known as “alternative equivalent proposals” that would allow developers to come up with their unique affordable housing mitigation plan and run it by the council to do something other than what is outlined in the proposed ordinance. A developer’s proposal has to be tied to affordable housing and the council could accept or reject the proposal. The council wants to keep all affordable units inside the town limits to maintain an economically diverse community in Crested Butte.
Town staff presented the council with an affordable housing fee project calculation as part of the work session discussion. It essentially showed that developers would be hard-pressed to make a profit with new commercial development projects in Crested Butte at this time, with or without affordable housing fees.
According to the staff report, “the pro-forma data was provided by a developer who does not have a project currently before the town.” The developer took a 9,375-square-foot retail development with 10 total units. It could be placed in several town business zones.
The staff checked its figures with other developers, bankers, real estate agents, local contractors and the building department. The pro-forma data concluded that the project would cost between $2.8 million and $3.1 million. The affordable housing fee, less the common space and the 500-square-foot exemption, would be $231,998 based on a 10 percent mitigation rate. The pro forma estimated the space could be sold for between $2.7 million and $2.9 million—a negative return.
“Under current economic conditions, the project is not feasible even before adding in the affordable housing fees,” the staff report concludes. “It becomes even less feasible when you add in the affordable housing fee.”
The report also showed that a similar building in Mt. Crested Butte would incur $18,078 in housing fees. Breckenridge would charge $18,750 in such fees and Steamboat just suspended its affordable housing fee to zero. It would have been $67,500 before the suspension. Telluride would require the developer to provide 5,670 square feet of affordable housing or 5,103 square feet of housing plus $129,276 in fees.
“This document shows that commercial development is problematic without affordable housing fees today,” noted Councilperson Glenn Michel.
“This tells us that until the market improves, commercial development in Crested Butte is iffy,” added Councilperson David Owen.
Both councilmen said the report didn’t change their support for the proposed Crested Butte affordable housing fees.
“I think we are on the right track,” said Councilperson Roland Mason.
Mayor Aaron Huckstep took a different view. “Right now this analysis says commercial development is a problem in town,” he said. “To tack on an extra burden in high housing fees effectively makes this a no-growth or slow growth ordinance.
“I’m not sure this makes sense to throw on a fee the size we are talking about,” Huckstep continued. “I see a red flag, especially when compared to the other communities in the report.”
Owen pointed out that Telluride required a more stringent fee.
“My point is we would be remiss to not recognize these numbers and admit it brings up real questions,” said Huckstep. “Does anyone else up here on the council see a red flag with these numbers?”
No one else at the table immediately responded to his query.
“The market just has to change that much more,” reasoned Owen, “and it doesn’t raise a red flag for me.”
“The report shows that the lack of development is not based just on the fee,” said Michel. “It is more on the general economy. But I still think it appropriate to phase in the increases.”
“No one on the council bats an eye at a $232,000 mitigation fee except me?” said Huckstep.
During the actual council meeting, Michel said the council had to take a stand at some time. “We seem to keep massaging this and I think we’ve moved the target around enough,” he said. “At some point we need to vote on it.”
Town attorney John Belkin noted that after many council discussions, the regulations have grown from a 13-page ordinance to a 20-page ordinance with a 20-page administrative process document and 20 pages of guidelines explaining and supporting the ordinance.
“This is broad and deep and complicated. Taking the appropriate time to review is justified,” Belkin said.
Councilperson Shaun Matusewicz agreed that taking time to do a thorough review was appropriate. Using the metaphor of a prom date, Matusewicz said Crested Butte is the “belle of the ball” as far as Colorado resort towns and he wanted to keep her that way. “Sure, you can get a plastic date out of Aspen, but Crested Butte is special.” Not everyone followed the analogy but Matusewicz made it passionately.
Councilperson Jim Schmidt suggested looking at finding an appropriate “trigger” to adjust the fees in the ordinance instead of arbitrarily phasing it in. Instead of phasing in the fees over a four-year period, he suggested it be tied to an appropriate metric. But no one on staff or council could figure such a nexus that was appropriate for Crested Butte.
Mason went back to the four-year phase-in. “I think that is fair because it comes in over a period of time and lets developers know what to expect,” he said. “Given the economic figures we’ve seen, it won’t make a big difference over the next couple of years but it might make a big difference in five years.”
“The bottom line is there is a finite amount of land in Crested Butte,” said Matusewicz. “If it doesn’t make sense now, it will make sense in the future.”
“We all agree affordable housing is important and we want to stay ahead of an economic comeback,” said Huckstep. “I want to make sure the council or staff is reviewing this regularly.”
The council set another work session to consider further changes to the ordinance and details of the other associated documents. That will be held April 9. The council would like to look at a nearly completed ordinance at the April 16 meeting and set it for public hearing, and then a council vote, for this spring.