The Crested Butte News Serving the Gunnison Valley since 1999
Financing details still in progress
By Katherine Nettles
Gunnison County signed an important contract last month with the contractor it has chosen to build the Whetstone Community Housing project in the North Valley. Gunnison County manager Matthew Birnie reported during the January 7 commissioner’s meeting that over the holiday season, the Whetstone development team had signed a final guaranteed maximum price agreement with Servitas, the county’s chosen developer for the 252-unit major impact project across from Brush Creek.
“That’s a huge milestone,” commented Birnie, adding that it took a couple months and “a lot of negotiation.”
Signing that contract allowed Servitas to finalize other details and the county now has construction costs locked in, said Birnie. The maximum price was set at $127 million.
Regarding the complex financing plan for the project, said Birnie, “We’re continuing to work with the bankers due to the unique nature of creating a bond for an organization that has never done that before.”
Gunnison County assistant county manager for operations and sustainability described some of the complexities involved in the financing plan for the $130+ million project which includes issuing revenue bonds.
“The financing plan has been delayed a bit due to the holidays. Financing like this is complex and requires a lot of diligence, we chose to delay so that we could ensure everyone has ample opportunity to review and not be rushed. We will be issuing revenue bonds, so the collateral is a pledge of all the rental revenues from Whetstone to the debt service along with the assets of the project itself. The assets will serve as collateral utilizing a mortgage, just like an individual buying a home mortgages the home as collateral.”
The county is using the Gunnison Valley Housing Authority entity for several reasons, said Cattles, including that the housing authority can enter into mortgages and the county cannot. “Further, the core operations and finances of the county will be insulated from the project’s performance,” he said.
Cattles explained that the debt is based on the rent revenue, not additional taxes from county property owners, so there is no requirement to get voter approval. “The Board of County Commissioners, both in their role as commissioners and as the County Housing Authority Board, have the authority to review and approve this financing. This financing is a business-like approach. We have designed the project to fund itself through the rents it will collect. We have built in several layers of safety in our proforma and set aside reserve funds to ensure that the project will have sufficient revenue to pay the debt service and operate the project,” said Cattles. “We’ve had a third party review the proforma and run stress tests on our assumptions which proved that the project is well planned and resilient enough to handle scenarios that may reduce rent collections for a time. The total of the bonds is the sum of the hard costs, reserve funds, bank fees, bonds, insurance, and compensation for our development partner.”
