Mt. CB to buy two Homestead units for employee housing

Still deciding how to finance 

By Kendra Walker

The Mt. Crested Butte town council agreed to buy two Homestead affordable housing units to be used for town employees at the March 5 council meeting. The council was split on how they will pay for the units, and will determine how they will finance them at a later date. 

Town finance director Karl Trujillo explained that the town’s housing fund is currently completely dedicated to paying for the Homestead project, including a $1.5 million to $2 million commitment toward a purchase assistance program for Homestead buyers. Trujillo presented three financing options for how the town could pay for their two units. 

Option 1 is to finance the whole thing and either issue tax exempt Certificates of Participation (COP) or do a Bank Placement. However, staff did not recommend this option and recommend going with either Option 2 or 3.

Option 2 is to finance the purchase of two units which would be less than $1,000,000.

“This would be a bank placement which only takes 30 to 60 days to complete. [Brokerage and investment banking firm] Stifel would help us put out a RFP to get the best possible rate. The rate would still be a tax-exempt rate,” he said, explaining the pros of this option. For cons, the Housing Fund would be completely committed for the next three years completing the Homestead process.

Option 3 is to borrow from one of the town’s other budget funds: the General Fund, Capital Fund or Downtown Development Authority (DDA) Fund. “Financing could be done at any timeline and no interest or financing cost would be charged,” Trujillo said. However, “the General Fund would be depleted down to $1.5 million, which is only 25% of expenditures when we try to keep the balance at 50% of expenditures,” he noted of the cons. He explained that those funds are also used for emergency funds, such as with a recession or COVID. “In the past when we’ve had a recession or something like COVID, fiscally we cut out all Capital projects. Unfortunately, you have to catch up with those projects in the future and it ends up costing you more money,” he said. “Borrowing from the Capital Fund would delay future projects. The DDA will have about $4 million this year but currently is considering future projects.”

“I’m not comfortable with that option at all,” said councilmember Janet Farmer. “I like Option 2, it gives us the flexibility for something unforeseen.”

“I’m also with Option 2,” said mayor Nicholas Kempin. “We’re talking about the Housing Fund being zeroed out, but we could make these payments over time.”

“Provided our excise tax stays in place and keeps bringing in the money [for the Housing Fund],” said town manager Carlos Velado. “These numbers are based on our Housing Fund predictions.”

“I’m a little bit torn. There are alternatives,” said councilmember Steve Morris. “We still have Option 4, which could be Option 2 but raise the excise tax so we have more funds to work with.” The current excise tax that goes toward the town’s Housing Fund is 2.9%.

“That’s assuming voters are enthusiastic to do that,” said councilmember Dwayne Lehnertz. “If we have the potential to not pay interest, it makes sense to me to not pay interest.”

“I’m with you on that too, I’m just concerned about our emergency fund,” said Kempin. “We would be renting the two units we bought, so we would have a small amount to offset from rent.”

“Another option would be to not purchase units in Homestead,” said Velado. “I’m not saying that’s the option you want to take.”

“If we take those two units out of the lottery, we’re potentially reducing the ability for town staff to get those units themselves?” asked Morris. 

“Not really. As the deed restriction is set up, the town staff has priority for our units,” said Velado. “We would be blocking someone else from the community out, but we do need to plan to house future employees.”

“Is committing this money to Homestead the right maneuver right now versus acquiring units in a different location in a year-and-a-half or two years?” said Morris, noting other developments coming down the pipeline that may provide affordable housing opportunities, such as the Villages at Mt. Crested Butte, Honey Rock Ridge and the Nordic Inn.

“Those are all still ideas, all speculation,” said Velado.

Kempin suggested the council take more time to ponder the financing mechanism and have further discussion.

The council voted to buy two Homestead housing units and will determine how to finance those units at a later date. The Homestead lottery is on March 15, but the transfer of money will occur 18 months later with Bywater Development.