The Crested Butte News Serving the Gunnison Valley since 1999
Staff advised to not shock the system but look at some cost increases
By Mark Reaman
Wading into what has always been considered murky waters, the Crested Butte town staff has requested the Town Council give them specific directions on how to handle the leases in town.
The town has 26 tenants in 14 locations throughout town. While no entity is behind in rent, 16 of the organizations do not have current leases with the town. Some of those organizations have not had a proper lease since 2001. According to a staff memo, lease rates vary from zero dollars per year to $7,200 per year.
The town’s rental rates are well below free market rates and many of the groups that have leases with Crested Butte do not pay some or all of their utilities. The town pays an estimated $17,250 annually for utilities, along with property insurance coverage and expenses for things such as snow plowing.
Capital costs are not cheap either. In 2016, the town spent $90,200 on the properties for things such as painting, boiler work and carpet. The 2017 budget has $74,000 allocated for such expenses.
Town collects about $35,600 annually in rent from the 26 tenants.
According to the staff memo, commercial office space rent in the town ranges from about $2.25 per square foot to $11 per square foot.
Retail space on Elk Avenue is $12 per square foot to $27 per square foot. The town is renting out office space at between $.20 per square foot to $1.47 per square foot. Non-office commercial space from town is being leased from $.02 per square foot to $.04 per square foot. Town retail space is going for $.07 per square foot.
“The staff is just trying to draw out what general approach the council would like with such leases,” explained town manager Dara MacDonald. “What sort of policy would you like? For example, utilities are all over the map. There is no consistent approach.”
“The precedent in the past was to help out the nonprofit organizations in town,” explained councilman Jim Schmidt. “The idea was to take care of nonprofits.”
“We go through the grant cycle every year independent of the leases,” noted councilman Chris Ladoulis. “We should look at what sort of subsidies we are supplying. At a minimum, we need to start valuing that space.”
“We don’t allow our service grants to be used for capital costs like rent,” said mayor Glenn Michel.
“That’s fine, but everyone should be aware of what sort of rent subsidy is being provided,” said Ladoulis.
“You probably want some sort of standardization with the non-profits,” suggested town facilities maintenance manager Dale Hoots. “There are only three for-profit organizations renting from the town.”
“As much as everyone wants everything to be standardized, there are always arguments about which nonprofits most benefit the community and how,” said Schmidt. “It’s never easy. And I can’t remember any of them ever leaving.”
The idea of using the town property as “incubator” spaces for organizations was discarded when it became apparent that once a group got into the low-rent situation, they rarely, if ever left.
“The gap with the free market is huge. The realm is so huge from where we are to where we need to be,” said Hoots.
“It is fair to say the town is losing hundreds of thousands of dollars a year between what we rent it for, what we pay and what the free market commands,” said MacDonald. “That’s fine but there is no firm policy on how much of a subsidy the council wants to provide. It is unusual for a community of this size to have so many spaces,” acknowledged MacDonald.
“Let’s not kid ourselves that these are incubator spots,” said Michel.
“Like Jim said, no one ever leaves. They’re like a tick once they get in there,” joked Hoots.
“The council probably wants the town manager to start raising leases without shocking the system and realizing that they will never be in line with the free market,” summarized Michel, pointing out that renting space for $.02 per square foot isn’t very real.
“The nonprofits need to know the value of the subsidy they are receiving from the town,” added Ladoulis. “It can be a benefit to their donors to show how much they are supported by the town.”
“Should we look at selling some of the property?” asked councilman Roland Mason.
Michel said many of the spaces were historic in nature and “problematic” for private ownership.
“The bottom line is that all of our nonprofits are important to the community,” said Michel. “We don’t want to be evicting anyone a year from now.”
“I envision the modest goal of some cost recovery for expenses with plenty of time to plan and work toward that,” said MacDonald. “I wouldn’t think anything would start until 2018.
Council said nonprofits should have priority over for-profit organizations for the leases and the cost–recovery ratio should be different for private companies versus the nonprofits. The idea of nonprofits leasing out their town-owned space to other groups also perplexed the council. They asked the staff to look into that issue.
MacDonald said the staff would create a policy document for the council to consider and approve before addressing any individual leases.
“Good luck,” commented Michel. “This one is always challenging.”
