County, town make utility progress on Whetstone

Looking at how to lighten the financial load

By Mark Reaman 

The path toward approving an official utility extension agreement between the town of Crested Butte and Gunnison County for the proposed Whetstone workforce housing project appears to be clearing with a mid-July decision date expected. The agreement that will include a so-called “will serve letter” will come with conditions to protect the town’s water and sewer system but allow the county to take the next concrete steps toward needed state and county approvals for the 252-unit development. 

A two-hour town council work session on Monday included opportunity for public comment and the general feeling appeared that council wants to avoid putting any of the project costs on current residents and utility rate payers. Council will look at what making a financial contribution, or some sort of partial relief of the $7.5 million in tap fees, would mean for both town citizens and future rental rates, but council members spoke passionately about the need to help get the estimated $146 million project across the finish line.

A working group of staff and elected officials had met twice in the last few weeks to reset the conversation about the utility extension and possible monetary contribution to the project. County commissioner Laura Puckett Daniels said the group was focused on solving problems and workforce housing was a shared goal. She said Whetstone was not intended to be a project for low-income workers but rather to address the so-called “missing middle” like nurses and teachers that made too much income to qualify for some deed-restricted housing but not enough to afford free market housing. “The target is to have an average AMI (Area Median Income) of 125%. It’s a big project but we understand it won’t fully address the needs of the community,” she said stating the county has about $7 million invested in the Whetstone project to this point. “We’re all-in with this project.”

Mayor Ian Billick acknowledged the intense work done by the town and county staffs to this point. “We’re looking at the tip of the iceberg. It’s a lot of work behind the scenes,” he said. “While there is not yet any guarantee the county will do the project, the costs being looked at do include the tap fees and cost of the Brush Creek roundabout.”

Gunnison County assistant county manager for operations and sustainability John Cattles said the needed state review is not a fast process but can’t begin until the county has a will serve letter for utilities, hence the push for that document from the town. The county’s preliminary and final plan review is in the same situation. “We’re pricing the project with contractors and hope to have a guaranteed maximum price for the project this fall,” he said. “But those prices can only be guaranteed for so long, so all this timing is important.”

Lowering startup costs can lower rents

As for lowering initial costs that would result in lower initial rents, members of the working group agreed that cost cutting “value engineering” had been implemented, but the thought of doing more was dismissed with the concern that livability for future residents would be negatively impacted. The idea of a cash contribution from the town and other government entities remains in play as does the idea of allowing the Whetstone development to pay the tap fees over an extended period of time instead of in one chunk at the start of the project. While town has in the past subsidized tap fees for affordable housing by repaying the water and sewer enterprise fund with dollars from another section of the town budget, no one spoke in favor of completely waiving or not fully reimbursing the enterprise funds. 

Councilmember Beth Goldstone expressed concern about the AMI qualifications and potential rents that could possibly exclude some households in that “missing middle” demographic from being able to live at Whetstone. 

Puckett Daniels said the goal was to have people with a broad range of AMIs be able to qualify for Whetstone. The idea was that once in, there would be opportunity for a household to continue to live in the complex even if they made more money over time and were bumped out of their original qualifying AMI. “The model we have attempts to provide the opportunity for people to live there a lifetime,” she said. “The goal is to have an average qualification of 125% AMI but it could be as low as 80% and up to 170% AMI or units with no AMI qualification.”

Billick wondered if AMI could be specific to the 81224 and 81225 (Crested Butte and Mt. Crested Butte) zip codes instead of Gunnison County as a whole. The AMIs in the North Valley are much higher than the overall county.

“The goal is to mix it up with people making different AMIs,” said Cattles.

Initial rental rates were a concern given the estimated $146 million cost. At 130% AMI, an average two-bedroom unit would rent for $3,006 a month, including utilities. To bring the cost down, an additional $7 million contribution could lower rents to about $2,843.

Councilmember Jason MacMillan wasn’t sure that made a big difference, but Billick said it could be meaningful for a couple trying to, for example, save that $150 for retirement. MacMillan added that while seemingly expensive, once set, the rents would be stabilized in the long-term and noted the rent also included utilities.

Councilmember Kent Cowherd said the fact rents wouldn’t rise in the long-term once the project cost was established was a huge benefit and those rents would look “appealing and affordable” in the future.

Cattles said the project could be refinanced after 10 years if interest rates declined and that would lower long-term costs.

Responding to questions from Billick, town manager Dara MacDonald said town had mitigated much of the risk of extending utilities through more check-ins with engineering consultants. She also said that even if the project did not fill up as quickly as expected, the county was responsible to pay the town availability fees. The county has yet to vet a proposed utility extension agreement. One was sent to the county this week for review. 

Money issues

While the majority of council voiced strong opposition to not fully reimbursing the utility enterprise fund the total cost of tap fees, Billick said he needed more information before agreeing to that position. He said that adding 252 more units to the system could actually lower the impact to current rate payers by spreading out the fixed costs of planned capital expansions even with a discounted tap fee rate. But, he wanted to see data around that issue and the capital improvement plan for utilities.

As for making a cash contribution, councilmember Anna Fenerty said that was likely possible only by selling a town asset. 

Cattles said paying tap fees over time would be significant. “It lowers upfront costs, and we need to know how much we will be financing this fall,” he said.

“Coming up with $7.5 million up front is way harder for the county than paying that over time,” added Puckett Daniels. “Timing is actually a contribution. Allowing tap fees to be paid over time is hugely advantageous for us.”

MacDonald said she could come back to council with the five-year capital improvement plan and council members could decide what they might eliminate in favor of a contribution to Whetstone. Council said that would be good information to consider. 

Billick made clear he did not think Crested Butte property taxes or current utility rate payers should subsidize Whetstone but was open to looking at sales tax subsidies. MacMillan said other valley stakeholders, such as Mt. Crested Butte, might consider contributing to Whetstone as well. 

Gunnison County assistant county manager for community and economic development Cathie Pagano said the county is waiting to hear about several federal grant opportunities and has had conversations with the Valley Housing Fund and Mt. Crested Butte about possible participation in Whetstone. Cattles said without more funding from other sources, the AMIs and rents may not be worthwhile to build the project. “It would push the county commissioners to the point of having to make a tough decision,” he said.

Public weigh in

As for the public input, most indicated support for the project but urged caution about putting any additional financial burden on current citizens.

David Leinsdorf urged council to listen to previous staff advice and not make a decision on a utility extension until the town had confidence in the engineering details. 

Brent Thompson said taxes were going up for business owners and it eventually impacted customers and renters, which was a difficult spot for everyone. He asked if businesses might be able to be a lessor on units and then rent to employees. “A rent of $3,000 is a lot for a cashier working two jobs,” he said.

Paula Martin asked council members to deeply consider the ramifications of making a financial contribution and asked them to lay out their reasoning for making whatever decision they decided upon. “If council moves ahead with an investment for Whetstone, what is it at the expense of,” she asked. “What is the impact on the budget to other important issues?”

Haden Spencer appreciated the majority of council voicing discomfort with not reimbursing the enterprise fund for tap fees. She agreed the engineering for the potential utility extension should be at a point higher than the current 30% of detail before the council makes a decision. She asked about possible annexation of the property to the town, but the council decided to not address that issue until a future date. Puckett Daniels said the county’s intention was to be responsible for future maintenance of the utility system whether the town annexed the property or not. 

Jim Starr said given that the town had declared a “housing emergency” this was an important project that would take subsidies of some sort to accomplish. He was impressed that the cost per square foot was coming at about $350 a square foot, well below market costs.

Fenerty agreed with the characterization of the valley being in a housing crisis and emphasized the importance of the Whetstone project. “I have friends who need to use my shower. Whetstone is an opportunity for the missing middle. It would be a benefit for the entire community.”

MacMillan said the housing emergency was not unique to Crested Butte but given the attractiveness of the valley, it would likely get worse. “This represents a step-change in our housing stock,” he said. “It is meaningful.”

“There is an urgent need,” agreed Billick. “I wish the risk would go away if we just said no but that won’t happen. I agree we need to be very clear in laying out our logic for the decision we make. I appreciate the county taking a hard analytic look at the project. I also think there is a huge risk if we can’t get this across the line so I will look hard at making some sort of contribution. There are still a lot of details to figure out.”

Billick emphasized there would be future opportunities for more public comment on the project at both the town and county level. The next big decision is expected to come at the July 15 council meeting when the council discusses the utility extension agreement and a general “will serve letter” for the county. Deeper discussions are expected to occur through the fall.

“This is a big decision for our community that can’t be taken lightly,” concluded Billick.

Gunnison County assistant county manager for operations and sustainability John Cattles said the needed state review is not a fast process but can’t begin until the county has a will serve letter for utilities, hence the push for that document from the town. The county’s preliminary and final plan review is in the same situation. “We’re pricing the project with contractors and hope to have a guaranteed maximum price for the project this fall,” he said. “But those prices can only be guaranteed for so long, so all this timing is important.”

Lowering startup costs can lower rents

As for lowering initial costs that would result in lower initial rents, members of the working group agreed that cost cutting “value engineering” had been implemented, but the thought of doing more was dismissed with the concern that livability for future residents would be negatively impacted. The idea of a cash contribution from the town and other government entities remains in play as does the idea of allowing the Whetstone development to pay the tap fees over an extended period of time instead of in one chunk at the start of the project. While town has in the past subsidized tap fees for affordable housing by repaying the water and sewer enterprise fund with dollars from another section of the town budget, no one spoke in favor of completely waiving or not fully reimbursing the enterprise funds. 

Councilmember Beth Goldstone expressed concern about the AMI qualifications and potential rents that could possibly exclude some households in that “missing middle” demographic from being able to live at Whetstone. 

Puckett Daniels said the goal was to have people with a broad range of AMIs be able to qualify for Whetstone. The idea was that once in, there would be opportunity for a household to continue to live in the complex even if they made more money over time and were bumped out of their original qualifying AMI. “The model we have attempts to provide the opportunity for people to live there a lifetime,” she said. “The goal is to have an average qualification of 125% AMI but it could be as low as 80% and up to 170% AMI or units with no AMI qualification.”

Billick wondered if AMI could be specific to the 81224 and 81225 (Crested Butte and Mt. Crested Butte) zip codes instead of Gunnison County as a whole. The AMIs in the North Valley are much higher than the overall county.

“The goal is to mix it up with people making different AMIs,” said Cattles.

Initial rental rates were a concern given the estimated $146 million cost. At 130% AMI, an average two-bedroom unit would rent for $3,006 a month, including utilities. To bring the cost down, an additional $7 million contribution could lower rents to about $2,843.

Councilmember Jason MacMillan wasn’t sure that made a big difference, but Billick said it could be meaningful for a couple trying to, for example, save that $150 for retirement. MacMillan added that while seemingly expensive, once set, the rents would be stabilized in the long-term and noted the rent also included utilities.

Councilmember Kent Cowherd said the fact rents wouldn’t rise in the long-term once the project cost was established was a huge benefit and those rents would look “appealing and affordable” in the future.

Cattles said the project could be refinanced after 10 years if interest rates declined and that would lower long-term costs.

Responding to questions from Billick, town manager Dara MacDonald said town had mitigated much of the risk of extending utilities through more check-ins with engineering consultants. She also said that even if the project did not fill up as quickly as expected, the county was responsible to pay the town availability fees. The county has yet to vet a proposed utility extension agreement. One was sent to the county this week for review. 

Money issues

While the majority of council voiced strong opposition to not fully reimbursing the utility enterprise fund the total cost of tap fees, Billick said he needed more information before agreeing to that position. He said that adding 252 more units to the system could actually lower the impact to current rate payers by spreading out the fixed costs of planned capital expansions even with a discounted tap fee rate. But, he wanted to see data around that issue and the capital improvement plan for utilities.

As for making a cash contribution, councilmember Anna Fenerty said that was likely possible only by selling a town asset. 

Cattles said paying tap fees over time would be significant. “It lowers upfront costs, and we need to know how much we will be financing this fall,” he said.

“Coming up with $7.5 million up front is way harder for the county than paying that over time,” added Puckett Daniels. “Timing is actually a contribution. Allowing tap fees to be paid over time is hugely advantageous for us.”

MacDonald said she could come back to council with the five-year capital improvement plan and council members could decide what they might eliminate in favor of a contribution to Whetstone. Council said that would be good information to consider. 

Billick made clear he did not think Crested Butte property taxes or current utility rate payers should subsidize Whetstone but was open to looking at sales tax subsidies. MacMillan said other valley stakeholders, such as Mt. Crested Butte, might consider contributing to Whetstone as well. 

Gunnison County assistant county manager for community and economic development Cathie Pagano said the county is waiting to hear about several federal grant opportunities and has had conversations with the Valley Housing Fund and Mt. Crested Butte about possible participation in Whetstone. Cattles said without more funding from other sources, the AMIs and rents may not be worthwhile to build the project. “It would push the county commissioners to the point of having to make a tough decision,” he said.

Public weigh in

As for the public input, most indicated support for the project but urged caution about putting any additional financial burden on current citizens.

David Leinsdorf urged council to listen to previous staff advice and not make a decision on a utility extension until the town had confidence in the engineering details. 

Brent Thompson said taxes were going up for business owners and it eventually impacted customers and renters, which was a difficult spot for everyone. He asked if businesses might be able to be a lessor on units and then rent to employees. “A rent of $3,000 is a lot for a cashier working two jobs,” he said.

Paula Martin asked council members to deeply consider the ramifications of making a financial contribution and asked them to lay out their reasoning for making whatever decision they decided upon. “If council moves ahead with an investment for Whetstone, what is it at the expense of,” she asked. “What is the impact on the budget to other important issues?”

Haden Spencer appreciated the majority of council voicing discomfort with not reimbursing the enterprise fund for tap fees. She agreed the engineering for the potential utility extension should be at a point higher than the current 30% of detail before the council makes a decision. She asked about possible annexation of the property to the town, but the council decided to not address that issue until a future date. Puckett Daniels said the county’s intention was to be responsible for future maintenance of the utility system whether the town annexed the property or not. 

Jim Starr said given that the town had declared a “housing emergency” this was an important project that would take subsidies of some sort to accomplish. He was impressed that the cost per square foot was coming at about $350 a square foot, well below market costs.

Fenerty agreed with the characterization of the valley being in a housing crisis and emphasized the importance of the Whetstone project. “I have friends who need to use my shower. Whetstone is an opportunity for the missing middle. It would be a benefit for the entire community.”

MacMillan said the housing emergency was not unique to Crested Butte but given the attractiveness of the valley, it would likely get worse. “This represents a step-change in our housing stock,” he said. “It is meaningful.”

“There is an urgent need,” agreed Billick. “I wish the risk would go away if we just said no but that won’t happen. I agree we need to be very clear in laying out our logic for the decision we make. I appreciate the county taking a hard analytic look at the project. I also think there is a huge risk if we can’t get this across the line so I will look hard at making some sort of contribution. There are still a lot of details to figure out.”

Billick emphasized there would be future opportunities for more public comment on the project at both the town and county level. The next big decision is expected to come at the July 15 council meeting when the council discusses the utility extension agreement and a general “will serve letter” for the county. Deeper discussions are expected to occur through the fall.

“This is a big decision for our community that can’t be taken lightly,” concluded Billick.