Town adjusts Paradise Park debt and unit count again

Interest rates, construction costs and town regs all a money factor

By Mark Reaman

While expressing disappointment with getting dinged with the “cold reality” of rising construction costs and higher interest rates, the Crested Butte town council on Monday again lowered the number of affordable housing units they would finance and build in Paradise Park from 17 to 14 and shifted from borrowing $10.1 million under a 30-year Certificate of Participation (COP) to $8.4 million with a 20-year term. Council officially voted 5-0 to enter into the revised debt structure and executed the site lease agreement. Mayor Ian Billick and councilmember Jason MacMillan did not attend the April 15 meeting.

Given the expected timeline, interest rates could shift before the debt is issued in late May and while lower rates could result in more units being able to be built, a higher interest rate could lower the number even more. The pricing for the COP and purchase of the debt is slated for May 30 with closing and funds being issued to town on June 11. 

Construction for phase 1, which involves building nine units to be leased up in 2025, would start this summer. Phase 2 includes five units to be rented in 2026. The Town anticipates charging rents that are affordable to households making 80-100% AMI (Area Median Income). Household income limits will be largely dictated by grants secured to help fund the project. The Town indicated that when the units are sold in 10-20 years, they anticipate targeting households earning 140% AMI and below.

Total development costs to the town would be $12 million, or $857,000 per unit, including interest costs. Under the COP, the town could consider selling the units after 10 years. A sale would be expected to bring in about $7 million (after 20 years). Before rents come in to help pay the debt, the town will borrow $1.3 million from its capital or general fund in 2026 to begin the COP repayments. That will be paid back over the 20-year financing term.

The average annual debt service for the town is expected to be $600,000. Given the finances, town would no longer fund the Good Deed, Green Deed or any other potential housing opportunities that might come along while under the COP debt. With the COP, town property would be put up as collateral, but the financial consultants for the town said the collateral being called is extremely rare. 

The town will put up the town hall, the Old Rock Library and the Ruby affordable housing buildings as collateral. 

Crested Butte housing director Erin Ganser told the council Monday that the new model lowers financing costs and produces the most housing units in the shortest period of time while preserving town-owned land as a resource for future development of deed-restricted housing. “This allows for better choices with the 20-year term and is a more conservative view for financing,” she said.

Councilmember Kent Cowherd asked for some council consideration to stay with the 30-year-term that allowed 17 units to be built. His logic was that the council would reevaluate the situation after 10 years no matter what.

“We started with the idea of 32 units being built then it went down and now we are at 14. I would like to build as many units as possible and three more units could be six more bedrooms. That’s a lot to me,” he said. “It is something to at least consider. We could get out after 10 years.”

Ganser reiterated that if interest rates go up in the next month, the number of units could decline even more. “This is hard. Financing costs with interest rates have blown up since we started along with construction costs. It’s a horrible combination,” she said.

Councilmember Beth Goldstone said that 14-unit number was still in flux and she still didn’t have the deep analysis she requested about building costs and why they were higher in Crested Butte at about $550 a square foot versus Gunnison and the Sawtooth housing project that was coming in at about $340 a square foot. Staff provided a broad overview document with no actual numbers included.

“We have higher regulatory costs than other places,” noted Ganser, who said the staff hadn’t had the in-depth conversation with the county and other entities to make sure a cost analysis was comparing apples to apples. “Our regulatory environment and community identity are what they are. Changing that is your call.”

Community Development director Troy Russ added that on the Crested Butte regulatory side, there were a number of factors contributing to higher costs. “It’s things like scale, density, shared walls and building efficiency,” he said. “It’s who we are. To change those things could happen but take time through the Compass process.” He explained that while Sawtooth-II in Gunnison and Mineral Point in Crested Butte were providing a similar number of units, Sawtooth-II was one building while Mineral Point was three. 

No one on the council was enthused with a shift in financing and reduction in unit numbers. “The 30-year term is longer than I’ve been alive,” remarked councilmember Anna Fenerty. “I’m not comfortable with the lack of flexibility in that scenario.” Councilmember Gabi Prochaska agreed.

“I’m a little uneasy we are borrowing more than $1 million from our other (general and capital) funds,” said Goldstone. “When the proposed housing fee didn’t pass a couple years ago it was said that the reason was in part that we didn’t have a plan. Now we have a plan but not enough money. If there is another opportunity in the future for more money for housing, we should consider it.”

“We aren’t giving up more housing units forever, just for now,” said councilmember Mallika Magner. “We have had some trouble selling affordable units in the past but we know there is a demand for rentals.”

“We have already spent a million dollars designing these,” added Fenerty. “We are trying to be as intentional in this process as possible. I’m a bit uncomfortable to take out that much debt, but this builds the most units in the quickest period of time. A previous council provided land for the trailer park where I was able to grow up. This will provide 14 opportunities for the future.”

“We are faced with cold reality,” concluded Magner. “We all wanted more when we started the process. And we want to provide a great product and not provide crappy places for people. It is disappointing and we all wish more were possible.”

Council voted 5-0 to proceed with the 20-year COP that at the moment will provide funding to build 14 units.

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