CB council expresses discomfort with giant fee increase

Is going from $61,754 to $1.5 million too much?

[  By Mark Reaman  ]

How much to charge commercial developers and residential homebuilders to help mitigate affordable housing issues in Crested Butte was a topic of discussion at a council work session on August 19. Council members were not enthusiastic about jumping into major fee increases immediately but were open to implementing higher fees in the future.

The town is updating its Resident Occupied Affordable Housing (ROAH) program impact fees. In a staff memo to the council, it was stated that that the ROAH fees were last updated more than a decade ago and, “economic and real estate conditions have changed substantially.” The memo explains that ROAH fees are meant to facilitate the creation and preservation of affordable housing in response to increased housing demand caused by jobs generated by both new residential and commercial development.

ROAH compliance can happen through the building of new deed-restricted units by developers of commercial property, through placing restrictive covenants on existing residential units or by making a payment in lieu for a fraction of a unit determined in a ROAH calculation, and staff suggested prioritizing building of units over the fee for new commercial developments.

Staff suggested changing the commercial calculation from being determined by a generic four jobs created for every 1,000 square feet of commercial space to providing a more direct nexus between the type of use and the number of jobs created. For example, bars and restaurants are expected to create about eight jobs for every 1,000 square feet while retail space creates about three. As for residential construction, currently the ROAH rate is based on a sliding scale depending on the size of the house. Staff is suggesting using one job generation rate for residential uses. Staff also recommends that all ROAH units target households at and below 80% Area Median Income (AMI). 

Big number potential

An average sized house would be charged about $15 per square foot for a 100% ROAH mitigation rate. It would be $7.57 at 50% mitigation. 

Commercial construction could see potential big jumps depending on the mitigation rate chosen, which is currently 20%. For example, a bar/restaurant would be charged $1,071 a square foot at 100% mitigation and $535 at 50% mitigation. A retail space would be charged $431 per square foot at 100% and $215 for the 50% rate. 

Using previous projects as an example, the Forest Queen paid $61,754 in ROAH fees in 2023, which was the fee equivalent of 1.14 housing units. Just by updating the fee calculation based on market conditions and keeping the mitigation rate 20%, the fee equivalent of 1.14 units would be $316,302. If changed to a full 100% mitigation rate, it would have been 5.71 housing units or $1,581,513. At 50% mitigation it would have been 2.85 housing units or $790,018. 

The Nordic Center Outpost addition was charged $95,809 in ROAH fees, which the town subsidized, but that calculation could equate to $263,923 based on the updated fee calculation at 20% mitigation, $1.3 million (4.76 units) at a 100% mitigation rate or $803,808 (2.38 units) at 50% mitigation.

Staff recommended eliminating the current ROAH exemption of the first 500 square feet of commercial developments and the first two units of lodging developments. Staff did recommend adding an exemption when a developer helps to meet “identified community and economic goals” including things like childcare facilities, deed restricted commercial space or “otherwise meeting an unmet identified need in the community.” Another suggested exemption was for additions to historic homes less than the total size of the historic building “in order to incentivize additions on historic buildings instead of increasing pressure for tear downs.” Council suggested looking into an exemption for small additions on any residential home up to a certain square footage.

Council thoughts

“I get nervous setting a new ROAH fee in the absence of knowing what the county is doing with their similar impact fees,” said mayor Ian Billick. “I don’t want to make a decision that pushes building outside of town that comes with transportation impacts, and water and sewer costs. Understanding how we compare with the county is important information.”

Councilmember Jason MacMillan did not want a huge increase in residential ROAH rates that would deter locals looking to build or add onto their homes. 

“I don’t want to tip it to the point there is no development in town,” said councilmember Kent Cowherd. “Looking at the potential fee for the Nordic building seems like it would be cost prohibitive.”

“My initial reaction to the mitigation rates was that when it came to commercial projects in town, ‘Only Billionaires Need Apply’ given how expensive they could be,” said councilmember Gabi Prochaska. “The 100% rates don’t make sense to me. I like the sliding scale on the residential side, and I appreciate the analysis of the different number of jobs created based on the type of commercial business being constructed. A restaurant is very different from an office space. But even the 50% mitigation rate is a big increase.”

“I know our commercial enterprises in town are always struggling, for example with higher property taxes,” said councilmember Mallika Magner. “Would we be squeezing our commercial businesses out of town with higher ROAH fees?”

“I like increasing the fees to help get the affordable housing we need,” said councilmember Beth Goldstone. “But I like the exemptions that promote business that is not necessarily tourist oriented. The affordability gap is real and if we can encourage commercial development in town that helps the local population, that would better than another restaurant I can’t afford to go to anyway.”

Town attorney Karl Hanlon said the town couldn’t offer different ROAH impact fees to “locals” versus “non-locals,” but it could look at projects that do or don’t meet stated community goals.

There was some discussion about researching if a ROAH fee could be imposed on a property owner changing a home to a full-time short-term rental. Hanlon said that was probably possible with the licensing fee when that change of use would occur.

Billick suggested that instead of asking first for commercial development to build onsite workforce housing units, perhaps having “payment-in-lieu” funding to go toward projects like Mineral Point or Whetstone would be a better use of the ROAH impact fee. “Two years ago I wouldn’t have considered that but now we are making progress with large projects,” he said.

MacMillan said he saw some benefit in having workforce ADUs (Accessory Dwelling Units) scattered about town. 

“Do one-offs help that much? What is the most effective way to use the resources for housing? And for me again, I’m more comfortable with the discussion when we understand the whole North Valley Comprehensive Plan and what the county is doing,” said Billick. “I suggest putting this aside and getting more clarification with some of these issues.”

Crested Butte Community Development director Troy Russ said the quick economic changes in the town have had a big impact. “The price of real estate is ridiculously expensive,” he said. “Is a higher ROAH fee impacting a business? The lack of employees will really impact a business. I do like looking at the comprehensive North Valley plan for some context.”

Billick said he felt the impact fee calculation overestimated the job creation element. 

“I lean toward higher mitigation rates with the proposed exceptions,” reiterated Goldstone. “It is important to get people in the jobs we need, and these fees can go toward units as soon as possible. With the exemptions, I am okay with a mitigation rate between 50% and 70%.” 

“I don’t know the right number. The 50% number is a big increase. The current fees are too low and the different rates for different commercial businesses make sense. I am willing to wait to get more information,” said MacMillan.

“I like the proposed exemptions and I think building units on a commercial site is like an ADU that spreads workers around town,” said Prochaska. “As for the mitigation rates, the 50% seems high to me. I am not comfortable committing to a number without more information. I do like the sliding scale with residential.”

“I’d like to see what the fee amounts would be below the 50% mitigation rate given the cost prohibitive nature of the fee,” said Cowherd. “What’s the analysis at 30% or 40%?”

“I like the idea of putting our rate in context with the county fees,” said Magner. “And I like the idea of encouraging businesses that benefit the community, so I like the proposed exemptions. And the idea of commercial ADUs can help with the sense of community.”

“I am very uncomfortable with big jumps in the fees,” said Billick. “I am super nervous about supporting big jumps that won’t necessarily result in big resources for housing but could have unintended consequences.”

Long range planner Mel Yemma indicated staff would do more analysis based on the council input and return for further council discussion on the issue.