CB council will issue debt for affordable housing project

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. 

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