For the past three years, the Town of Pagosa Springs has maintained an official policy of supporting the creation of new workforce housing — housing priced at a range affordable to the average working class family. One of its main actions so far has been the completion of a Housing Needs Assessment, published last year by consultants Economic and Planning Systems.
The Town Council has also consistently accommodated the proposed Hickory Ridge workforce housing project — first by waiving impact fees on the project, then by foregoing a traffic study suggested by Town Planner Tamra Allen, and then at this month’s meeting, by discounting sewer hookup fees by $100,000. Continued...
Eric Kjellgaard, Executive Director of California-based Opportunity Builders, cheerfully asks the Pagosa Springs Town Council for a $100,000 sewer fee waiver, as Sanitation District Supervisor Phil Starks, right, looks on. |
The multi-building project is slated for a fairly steep hillside overlooking the north Pagosa residential area — in view of the Pagosa Daily Post offices, in fact — and will include a new driveway winding up from Florida Street. Hickory Ridge project has proposed 4 buildings of 10 rental units each — a total of 40 rental units — plus a community building. It will serve families making less than 60% of the Area Median Income — which, in Archuleta County, means less than about $25,000 a year. Because the project has received special tax credits from CHFA (Colorado Housing and Finance Authority), the rental rates must remain affordable to working class families for a period of 30 years.
Hickory Ridge is the community's only affordable housing project currently in its approval stages, as far as I know.
And with the local construction industry struggling in recent months, the project might be a shot in the arm for some Pagosa contractors and subcontractors.
 At this month’s regular Town Council meeting on July 1, the Executive Director of California-based Opportunity Builders, Eric Kjellgaard, was the closing act after a long meeting. Earlier in the meeting, the Town had agreed to sponsor a $200,000 Community Development Block Grant (CDBG) on behalf of the Hickory Ridge project. That grant will not entail any costs to the Town, as I understand it.
Kjellgaard began his presentation by outlining some of the unexpected monetary hurdles non-profit Opportunity Builders has faced in financing the project. Perhaps the chief hurdle was Kjellgaard’s difficulty selling CHFA’s housing tax credits at the expected rates — due to the current housing market downturn.
”Basically, the biggest loss to us has been the loss of equity we would be receiving from our investor who purchases the [CHFA] tax credits. That amount is currently about $800,000 less than we had initially anticipated when we first received our approval from CHFA last year. In addition, our projected costs have increased to the tune of about $150,000.”
Kjellgaard noted that the architects have been striving to cut costs, by re-positioning the buildings on the hillside to minimize the need for expensive retaining walls.
"From listening to the discussions [earlier in the meeting] I understand that the Town sanitation district is in need of funds as well, so I am going to do something that I might regret later. Although I originally requested a full waiver, I would be very grateful for a partial waiver [of the sewer fees.]”
Tamra Allen, who is currently serving as both Town Planner and as interim Town Manager, reminded the Council in her introduction to the Hickory Ridge discussion that there would be substantial fiscal impacts to the Town if it decided to waive Hickory Ridge’s $153,000 plant investment fees entirely. The Town is currently in the planning stages of a new sewer treatment plant, required by recent changes in Colorado’s water quality laws. Two years ago, that sewer treatment plant was estimated to cost about $2 million. Earlier this year, the estimate was about $4.3 million; under former Town Manager Mark Garcia, the Town had reportedly arranged about $3.7 million of that amount in grants and loans, with the remainder to come from Town reserve funds.
Nearby Bayfield, Colorado, is scheduled to began construction today, July 14, on a similar treatment plant, about 2/3 the size of the Pagosa facility; the projected cost for the Bayfield facility is $7.1 million.
Understandably, the Town Council was concerned about waiving sizable plant investment fees when facing such projected costs. But Kjellgaard presented his proposal as a possible “make it or break it” option.
“We are seriously inching toward the precipice of: Can this really go forward?” Kjellgaard told the Council. “I really appreciate everything this Council and Town has done to date, because you are progressive, you are doing things other communities aren’t doing yet.”
Kjellgaard then suggested that the Town waive 2/3 of the plant investment fee — about $100,000 — and Opportunity Builders would pay the remaining $53,000.
“I need that $100,000 to keep this project moving forward. Without it, the project may be in trouble — and the community may be in trouble, for lack of affordable housing.”
Councilor Stan Holt asked Kjellgaard when the project might break ground, if this waiver were granted. Kjellgaard said there was a chance construction might start in the fall, but that a spring start might be more realistic.
Councilor Mark Weiler asked if Opportunity Builders would consider paying the full plant investment fee if the payments were stretched out over a ten-year period, rather than being required up front. Kjellgaard replied that, due to the CHFA financing and the accompanying deed restriction, it is very difficult to take on long term debts with a project like Hickory Ridge.
“Everything is very tight on a cash flow basis, and to take on an extra hundreds of dollars a month, based in on available cash flow, really creates havoc for us,” Kjellgaard said.
In the end, the Council approved a $100,000 fee waiver, with the stipulation that, should Hickory Ridge someday become a market rate rental property — rather than a rent controlled project — the $100,000 waiver would be paid back to the Town. According to CHFA requirements, that could not happen for at least 30 years.
Hopefully, the sewer treatment plant would be completed before then? |