CB council approves utility extension to Whetstone

Risk versus reward…

By Mark Reaman 

The Crested Butte town council on Monday unanimously approved an amended Utility Extension Agreement (UEA) to provide water and sewer services to the proposed Whetstone workforce housing project located two miles south of town near Brush Creek Road on the west side of Highway 135. 

Responding to public concerns over the amount of expected monthly rents and which local workers would qualify for units, perceived conflicts of interest, the integrity and capability of the county’s chosen development partner, Servitas, the location of the project, and provisions protecting the town within the UEA, members of the council made clear that while not a perfect project, Whetstone was a worthy development that seriously addressed the housing issue in the area.

The amended UEA allows the county to pay the town’s $7.5 million utility system investment fees (tap fees), over 15 years with no interest. It also sets out that a pedestrian underpass beneath Highway 135 from the development to the bus stops will be open before the first occupants move in.

Town manager Dara MacDonald and town attorney Karl Hanlon assured the council that the staff feels the UEA includes legal and financial protections for the town.

Gunnison County commissioner Laura Puckett Daniels said the project had reached the current point after years of discussions between Crested Butte and the county. 

“Conversations were held in 2021 and lots of things have been hashed out in that time,” she said. “The goal has always been to address housing and work together as partners to move Whetstone forward as a piece of the housing puzzle.”

Are the rents affordable?

Crested Butte councilmember Mallika Magner asked about the expected rental rates she described as a legitimate public concern. Puckett Daniels said the county is looking for ways to reduce the rents. “The recent roundabout grant helps with that,” she said. “Paying the town system investment fee over time helps. More grants or philanthropy could help. But we need to be conservative with the projections. We need to make sure it is a quality place to live. It’s a balancing act.”

She emphasized that projected rents include utilities and maintenance cost. “Rents will be stable over time. At the end of the day, we need to rent the units to generate income so we will rent them at what the market demands.”

County manager Matthew Birnie said conservative base numbers had to be met to ultimately obtain financing. He also said the project could be refinanced after 10 years when hopefully interest rates were lower.

Crested Butte mayor Ian Billick also suggested a future town council could make a contribution that would lower rents.

If nothing changes, Birnie said the amount of rent would increase over time to keep up with costs, but that would not be expected to be a major increase. “Our intent and practice with our other rentals is to have leases which guarantee two years of unchanged rent. If the renter decides to renew after the initial year, the rent won’t increase. After that we will revisit the renter’s income and rent and adjust accordingly,” he explained. “We have modeled an average of 3% increases, but we will try to minimize rent increases to the maximum extent possible. We are trying to keep rents stable over time.” 

“The project has to cover its expenses, but it is certainly not looking to make a profit,” said Puckett Daniels.

Assistant county manager for operations and sustainability John Cattles said AMI (Area Median Income) linked to units don’t normally adjust dramatically. The one anomaly for that was during Covid.

Billick said the county had met the town requirements negotiated during the UEA. “Affordability is a challenge,” he admitted. “But it will be more painful and expensive if we put this off. Probably after I’m off council, I could see the town watching how the absorption rate is and perhaps putting in money to bring rents down.”

Billick said he too believes council has a responsibility to current town utility payers. “If we don’t do Whetstone, the current rate payers will pay more in utilities in the future,” he said. “This brings on more rate payers to spread the burden.”

Concerns expressed

A half dozen citizens commented on the UEA, most of them raising concerns. 

Marco White said the location wasn’t ideal but if it was going adjacent to Riverland, some consideration to helping that subdivision solve its water and wastewater issues could be tied in with the utility extension. Riverland properties are all on septic systems and water quantity has been a consistent issue.

John Murphy, a Riverland property owner agreed. “I feel like Riverland hasn’t been considered at all,” he said. “All the properties of Riverland, located next to the river, are on septic systems so it’s a matter of time before there is an issue. It makes sense to protect the water in this area. We’re an environmental community. Is there a way to get Riverland on this utility system as well?”

Birnie said the county would not oppose working with Riverland to somehow tie into the utility project but stated that “would be an enormous lift for that community.”

Marcus Martin said that in an exchange between MacDonald and Birnie discovered through a CORA (Colorado Open Records Act) request, MacDonald informed the county she had heard some serious concerns over Servitas and its work in Summit County. Martin said Birnie assured her in the exchange the county was protected if something went south with Servitas. Martin said that should be a red flag for the council.

“I appreciate the open and collegial relationship with Matthew and am glad he took my comments seriously,” said MacDonald. “Matthew is very good at getting major projects financed. The town itself is not impacted by the proforma of the project, the county and its financing is. I don’t know what Matthew did with the information I passed on to him.”

MacDonald clarified that a colleague involved in a project similar to Whetstone in Summit County had told her Servitas had not followed through with some project expectations and that had raised red flags for her that she passed on.

Birnie said he followed up on the information “in a number of ways” and was comfortable there “were no major gaps or significant red flags” with Servitas and the pro forma. 

“Additionally, we are using Servitas as a consultant, but the County is really the developer,” he made clear on Tuesday. “We are very confident that if the numbers work, we will be able to execute the project successfully and we are not relying on Servitas for that. I do believe our process and contract will protect both the County and the project itself. We have continued to adjust the pro forma as we move through our design and preconstruction process and toward a decision about proceeding with the project or not.”

David Leinsdorf expressed concern that according to the UEA, if the county does not start construction of the roundabout and Brush Creek County Road intersection by June 1, 2027, Crested Butte becomes responsible for construction upon receipt of an $11 million payment, minus related expenses incurred by the county. He asked that the council explain why that would be in the best interest of the town.

Hanlon said given that a major priority of council was that a roundabout be part of the project, that clause was part of the UEA to make sure the roundabout was built in a timely fashion. 

Valley Housing Fund board president Scott Desmarais and Crested Butte-Mt. Crested Butte Chamber of Commerce executive director Heather Leonard both spoke in favor of the UEA and Whetstone. “Whetstone doesn’t happen without people coming together and it is essential for the valley,” Desmarais said. “Whetstone is not perfect, but it is a bold action for the county and town.”

“Is this perfect? No,” said Leonard. “Are there still things to be worked out? Yes. But we have a need for a variety of housing for people. It is important to the community to have this niche that centers on rentals.”

George Gibson described the project and the process as flawed. “Whetstone is too big, too crowded and too obtrusive,” he said. “The rents are way too high despite all the efforts to lower them. The process itself has been ugly and unfriendly with council allowing only limited discussion.”

Risky business?

As for general risk for the town, Hanlon noted if the county can’t attract financing for the project, it goes away. He said the risk of the roundabout not being constructed is likely very low with the recent federal grant award. “If the county picked a bad developer, there isn’t much risk for the town since we’re a service provider.”

“If the project fails after it is constructed, we wouldn’t let it fail,” said Magner.

“There’s a political risk but not a legal or financial one,” indicated Billick.

“Through the process, council has asked thoughtful questions to mitigate the legal risks,” said Hanlon. “It’s a balancing act and there is no perfect answer, but I think you’ve mitigated the risks with this agreement.”

“If it’s built and the county runs into a problem with filling units for example, the reality is that the North Valley is all of us,” said Billick. “If they ran into issues, I hope we’d be working together to solve the problems.”

Councilmember Beth Goldstone wanted to make sure the deed restrictions tied to AMIs couldn’t just go away. Hanlon assured her the UEA would keep them in place.

“We also have state and federal grant restrictions,” said Puckett Daniels.

Crested Butte housing director Erin Ganser concurred. “The state also has skin in the game and wouldn’t want to see the project go down,” she said. “It would be all hands on deck.”

Councilmember Anna Fenerty said she was elected to council to pursue affordable housing. “I was raised in affordable housing and live there now,” she said. “My duty is to make sure we have affordable housing for Crested Butte. 

“I value the concerns and advice we’ve heard from the public to be cautious,” Fenerty continued. “But this is a decisive point in the community. Whetstone provides opportunity for people to come in and it is designed to provide a sense of community. Weighing the risk and reward, the reward trumps anything I’ve heard from the other side.”

Councilmember Kent Cowherd said the process was not rushed and appreciated the county met all of the town’s requests, including the promise to work on and enact a new corridor plan.

“The rents could be better. The location could be different,” said Billick. “But my take is we need to figure out how to move forward. The question is what project can we get done that addresses the housing issue? There are no right or wrong answers.”

“I hear the public concern over affordability,” agreed councilmember Jason MacMillan. “The rents are in line with what is in the paper. But it’s not just about cost, it’s about stability.”

The council voted 7-0 to approve the UEA to support Whetstone.