County plans to divert $1M from LMD to fund housing

“Let’s put money to work”

By Katherine Nettles

Gunnison County commissioners last week agreed to make their first shift in Local Marketing District (LMD) funds from marketing, tourism or economic development to fund workforce housing projects. They did so with a $1 million gesture, committing to appropriate the funds in 2024 to help ensure the success of the Sawtooth Phase 2 housing project in Gunnison near the fairgrounds. 

This diversion of LMD funds to a housing project will be the first of its kind in Gunnison County since voters passed ballot issue 6A last fall allowing up to 40% of the LMD budget to be used for workforce housing and childcare.

The $1 million would amount to about 29% of projected LMD revenue based on the LMD’s current 2023 projections of $3.4 million. Commissioners plan to update their strategic plan in 2024, and commissioner chair Jonathan Houck said that will include planning out how the LMD funds, including the new allowances for workforce housing and childcare, might look over time.

Assistant county manager for operations and sustainability John Cattles presented the funding request. He reviewed that Sawtooth Phase 1, comprised of 18 units, is scheduled for completion this fall and phase 2, with 30 multi-family units, is currently in the design phase but facing budget shortfalls. 

Both phases of Sawtooth are aimed at being rentals for eligible residents with an income at 80% of Area Median Income (AMI). Phase 1 is expected to generate about $250,000 in revenue annually, Cattles explained, and was funded primarily by a one-time American Rescue Plan Act (ARPA) grant. “The goal is that that money goes back into funding other housing, and supporting the rest of the project, phase 2,” he said.

The estimated budget for phase 2 is $11 million, which includes an anticipated Department of Local Affairs (DOLA) grant the county has applied for to cover geothermal and a solar array for the project. 

From the current 2023 budget, Cattles said he anticipated that current lending rates would leave a gap in revenue from the anticipated 80% AMI to cover the project’s costs. “So we’re asking the board to consider in our 2024 budget using LMD funds to help fill that gap. If we can get $1 million in LMD funds as well as the revenue from phase 1, we’re pretty close to a project that’s cash neutral at 80% AMI.”

 “And we would continue to seek other funding sources because, as we’ve discussed, the more equity we can put in the more cash flow that will give us for investing in projects,” county manager Matthew Birnie said. He said he is hopeful that some significant grant funding opportunities will still come in and accelerate the process of paying the project down.

“And our long-term goal is that we maintain ownership of these properties we provide for that specific space in the AMI that is really hard to meet,” said Houck. “We want these revenues to be dedicated over time back into housing…and be bringing down that cost so that the revenues can be given back into meeting those needs.”

“And we are on the cusp of developing an annually renewable revenue source that is a tool we can utilize for other housing projects in perpetuity,” said Cattles.

“Even if we just get to neutral on this project, that’s a huge win. Because we’ve been able to create this housing and it is self-sustaining,” added Birnie.

Commissioner Liz Smith commented that the allowable use for the LMD revenues is capped at 40%. She asked what kind of revenue might be coming in after the debt is paid off. Cattles said about $630,000 per year once the debt is paid off in about 20 years.

“So I think the $1 million ask is well within the frame of being substantial and meaningful. We do know that there’s LMD reserves and those were collected before our passage of [6A],” said Houck. “I feel comfortable that we can backfill some LMD needs out of those reserves on the marketing sides. I’m feeling comfortable that we could contribute to this project in this way. I also want the community to hear that we want to be nimble and say, ‘you said yes to this’…I feel the importance of saying yes, let’s put money to work.”

Smith said she also wants to look at strategic planning for LMD funds in the new year. “I think it’s important that we as a board circle up to how we’re going to manage these needs, which are housing but also the other things people voted for. Early childhood education needs support,” she said. “And being thoughtful of the whole package that the community voted for so we can have that clarity for the community and expectations for how we are doing this,” she said.

Commissioner Laura Puckett Daniels agreed that all aspects of giving the local workforce a good quality of life is important and applauded the model and investment. 

County attorney Matthew Hoyt said that based on the commissioners’ interest in committing the funds, they will still need to be appropriated in the budget for 2024.

Cattles explained in an email to the Crested Butte News this week that there are no plans to request more LMD funds for other housing projects, such as the Whetstone Community Housing project planned for the North Valley. “We do not plan to ask for more from LMD at this time. During the budgeting process for 2024 the board will discuss the LMD funds and make decisions at that time. For Whetstone we will look into every possible source of funding as we get closer to construction.”

Gunnison County has partnered with Fading West in Buena Vista to manufacture the homes for the Sawtooth projects and Big C Construction to handle the on-site work and installation.

Cattles said they are hoping to get construction documents finalized for phase 2 and “hopefully start some work this fall.”