I know, our "Guns Dept" is famous for purchasing $300 screwdrivers. We spend almost $1 trillion/year on a military that's ill-prepared to fight our major adversaries. So it's pretty hard to out-screw up the Goliath of tax spending folly.
However, Steamboat Springs is "David". Smaller but even more f-cked up (if that's possible). They deserve the Spritzler Gold Chalise Award. How, you ask, do you compete with the military-industrial complex?
First, you decide to provide affordable housing aka Karl Marx style by letting the Politburo (a bunch of City officials who know zero about development) build a massive 534-acre development on a POS parcel (nobody wanted). Then you announce you'll be spending $582 million on infrastructure, with money that you haven't got. BTW that's $233,000 per apartment. That's right folks your below-market units (most of which are 1 & 2-bedroom apartments) will cost $233,000 before you pay for architects, engineers, any unit construction costs, interest expenses, and sales commissions. Ergo you're affordable housing will cost more than luxury Beverly Hills condos.
Of course, the City will spend all this money on infrastructure and find out that few are interested in renting or buying at the exorbitant prices required. Then they get stuck holding the bag, along with Steamboat's taxpayers.
But wait, it gets better. The City projects the 2,500-unit project will generate 25,000 additional car trips to the mountain every day. So the already congested center of town will look like NYC at rush hour. Sound fun?
Money on the map: Financing a focal point of Brown Ranch talks
Aug 22, 2023
Hank Lacey
For Steamboat Pilot & Today
Jason Peasley, executive director of the Yampa Valley Housing Authority, speaks to the crowd at the Stings Music Pavilion on Oct. 6, 2022 while laying out the Yampa Valley Housing Authority's plans for the Brown Ranch property.
John F. Russell/Steamboat Pilot & Today
Hundreds of millions of dollars for infrastructure. Millions each year to pay for municipal services to Brown Ranch households.
How to pay the costs of constructing the supporting foundations of an entirely new urban district and provide city amenities to thousands of homes has been a consuming question for Brown Ranch planners.
However the puzzle is solved, no new taxes are on the table.
“There isn’t a tax increase that’s being proposed,” said Leah Wood, president of the Yampa Valley Housing Authority board.
YVHA has crafted a plan to cover its share of infrastructure and help the city pay for operational costs associated with the expansive affordable housing project.
Steamboat Springs, on the other hand, faces a significant gap between its share of the costs that come with building the project’s buttresses and identified funds.
Infrastructure expense
Between them, the city and YVHA are expected to incur costs of about $582 million to pay for the physical framework needed to support the structures at Brown Ranch.
This is the last installment in a three-part series focused on the planned development of the Brown Ranch site. This article examines how the city might pay for the massive workforce housing project. Previous articles looked at the scope of the project and necessary infrastructure.
Most of that — about $281.3 million — is accounted for by a loosely defined category called “public works” that encompasses sewers, sidewalks, streets and water pipes.
Approximately $101.8 million is allocated to parks, open space and trails, while about $35.8 million will be allotted for the electricity skeleton at Brown Ranch and an estimated $57 million will be needed up front to pay for a geothermal energy facility.
An emergency services facility and supporting structures will cost about $23.1 million, while about $78 million is for broad purposes that includes “general conditions, bonding, permits, contingencies and soft costs,” according to YVHA Executive Director Jason Peasley.
The city and YVHA will unequally share the half-billion or so dollars of expenses. According to a summary presented at a Brown Ranch Annexation Committee meeting earlier this month, the housing authority is responsible for about $423 million of the infrastructure costs and the city must cover about $159 million.
Allocation of a large percentage of the city’s short-term rental tax revenue to YVHA is needed if that organization is to pay its portion. The housing authority wants 75% of the STR tax proceeds each year.
City Council member Joella West expressed worry at a BRAC meeting Friday that three-fourths of the STR tax funds may be a bridge too far for the community. She said that the housing authority has not suggested any useful way to demonstrate progress toward building homes and that, as a result, local voters may not want to commit that much of the STR tax revenue pot.
“There has to be some kind of measurement,” West said. “Every department in this city has to account for itself, at least on an annual basis.”
YVHA has proposed building Brown Ranch in three phases, with the first to be completed sometime in 2026 and the other two ready for occupancy during the 2030s. That scheme was described in the Community Development Plan for the project.
“It’s important to think of the project in phases and sections,” Wood noted. “This is something the housing authority does with every project that we do.”
Peasley said the city has sought to use its control over building permits to force YVHA to satisfy the city’s desired timeline for the housing authority’s infrastructure investments.
“To the extent that we have control over the delivery of units it’s not hard for us to make commitments,” he explained. “But when the city is sitting there saying that any time we have the right to deny your building permits, that doesn’t really put us in a strong position.”
Peasley said that negotiators are continuing to address the kerfuffle over potential building permit withdrawals as discussions about an annexation agreement continue.
He was unsure whether the city would compromise on the issue.
“The point that we’re trying to make is that if the city doesn’t follow through on the capital improvements that are needed by the community, their first remedy is to shut down the affordable housing pump,” he explained. “Our position is, ‘you shut down all development.'”
Wood emphasized that Steamboat Springs electors approved the STR tax last year with an understanding that the funds it generates will be directed to solving the city’s housing crisis.
“The STR tax was set at 9% based on a projection of funding needs for the Brown Ranch project,” Wood said. “It was very clear on the ballot last year that the STR tax was going for affordable housing and Brown Ranch was featured in the ballot language.”
Whether any of the city’s STR levy proceeds are sent to YHVA will have to be determined by voters, to whom Colorado’s 1992 Taxpayer Bill of Rights gives the decision power.
“We can’t approve the STR deal, the STR monies, without taking it to the community,” City Council President Robin Crossan said.
The housing authority will also rely on a combination of grants, other private philanthropy, and debt and equity financing obtainable by its development contractor, The Michaels Organization, based in Camden, New Jersey.
Wood explained that YVHA will pause construction of infrastructure, if necessary, to avoid a situation in which expected funds to cover the costs are not available to the organization.
“I’m confident that we are providing the most reasonable projection we can of those numbers at this time,” said Wood, a veteran asset manager and financial analyst. “If for some reason, if we don’t hit those targets, we can raise debt and equity funds to fill those gaps. And if we can’t do that and we don’t have a fully funded budget, we won’t build it.”
Most of the city’s share is tied to needed improvements of U.S. Highway 40 (about $56.6 million), expansion of the Elk River water treatment plant (about $17.9 million), and the extension of the Yampa River Core Trail (about $2.4 million).
While Steamboat has determined ways to fund some of those undertakings, no specific money source for repairs and upgrades to U.S. 40 has been identified, a problem that Peasley said the city has ignored.
“That cost is the big unknown for the city,” he said. “They’re only thinking about it in terms of Brown Ranch. The city’s just not willing to account for that in the fiscal plan.” “Their position is, ‘We have no guarantee from CDOT or the U.S. Department of Transportation that they’re going to commit money to this, so it’s got to be zero.'”
Peasley also argued that holding back STR revenues from YVHA because the financial fix for U.S. 40’s problems is unidentified poses an unfair risk to his agency’s mission.
“The city would like to make that my problem,” he said. “We can’t develop more housing for people if we haven’t figured this out.”
The city expects to allocate about $62.5 million in STR and other tax revenues for infrastructure costs, about $27.3 million in expected water and sewer tap fees generated by the project, about $25.7 million in municipal debt, and about $2.5 million in anticipated grant funds.
Altogether that leaves Steamboat short by about $41.2 million.
Whether additional state or federal funds will be made available to Steamboat Springs to bridge its fiscal crater is not known.
Council member Michael Buccino said he is confident that Colorado authorities are likely to help Steamboat.
“They’re going to pony up because they promised verbally that they’re going to support this,” he said.
The Department of Local Affairs has already given YVHA $750,000 under the state’s Energy/Mineral Impact Assistance Fund. The housing authority has also asked for at least $6.9 million more to pay for geothermal energy and wastewater projects at the affordable housing area.
State Sen. Dylan Roberts thinks monies made available by recent legislation are a feasible source to pay at least some Brown Ranch-associated costs.
“We’re seeing mountain communities, as well as larger cities, receive considerable amounts of funds to see transformative projects move forward,” Roberts said.
Steamboat Springs has opted in to receive Proposition 123 funds. That statewide ballot measure, approved last year, allows Colorado to give grants and loans to local governments for affordable housing purposes.
As for federal aid, Sen. John Hickenlooper sought to include a $3 million earmark in a recent appropriations bill. The effort failed, but both he and Sen. Michael Bennet are likely to continue seeking federal funds for Brown Ranch.
Neither Routt County nor the Steamboat Springs School District, which will collect property taxes from properties at Brown Ranch, have offered additional help to the city.
The county has provided $1 million for a trail, but, according to County Manager Jay Harrington, county officials are unsure that additional tax revenue that will be gained when Brown Ranch is completed would justify additional investment in the project.
“We do not expect the property taxes to cover the wide range of county services provided and have no expectation of excess revenues to contribute to Brown Ranch infrastructure,” he said in an email. “We do not anticipate additional funding being available for the project.”
As for the school district, spokesperson Laura Milius declined to answer a question about whether it would allocate any property tax revenue to the project.
Yampa Valley Housing Authority/Courtesy photo
Paying the day-to-day costs
Households in Steamboat Springs are provided with an array of city services, including the general functions of municipal government, fire and police protection, parks, public transportation and streets.
For each existing home in the city, those costs total $5,943, according to an agreement between city staff and YHVA set forth at the Aug. 8 BRAC meeting. The city brings in $5,403 in sales tax revenue per home.
As Brown Ranch is built, the city will provide the same services to residents there. That means the difference between the city’s general fund obligation to provide amenities and the tax revenues it takes in will grow.
On a citywide household basis, the gap is expected to reach an expected $1,203 per year by the time Brown Ranch is constructed.
By 2025, the total municipal operations fiscal deficit will be about $1.5 million per year, with about $600,000 traceable to existing homes; by 2036, the funding chasm is expected to reach about $2.3 million annually, with more than $900,000 of it connected to current households.
By the time the last phase of Brown Ranch development occurs, the city’s aggregate shortage caused by the providing services will reach about $3 million per year. That will include about $1.2 million attributable to current Steamboat households.
Avoiding the increase in the funding chasm that Brown Ranch is likely to cause could be difficult, given the city’s reliance on sales taxes. Steamboat Springs gains new revenue from its excise only if residents spend more money or more tourists do so.
To address Steamboat’s operations shortfall, YVHA has committed to providing the city with $1,203 per Brown Ranch household per year to close the fiscal fissure enlarged by Brown Ranch development.
That sum will be adjusted for inflation on an annual basis.
“They lose money with every new household that comes in,” Peasley explained, referring to the city. “They weren’t willing to take on the responsibility of solving that problem.”
YVHA’s effort to fix it could raise the cost of affordable housing to the community.
“The vast majority of ways in which we can guarantee this revenue comes to the city is to just charge more to people that live there, all so that those people can get the same level of services that everyone else in the city pays nothing for,” Peasley said.
The housing authority has proposed to unravel the fiscal knot with an array of tools. It will likely include a new metropolitan district, application of existing property tax revenue collected by YVHA, and a fee on the transfer of title upon sale of real estate within Brown Ranch.
Homeowners would pay a metro district assessment of 5-10 mills as part of their semi-annual property tax bill. Each mill equals one dollar of tax per thousand dollars of assessed valuation.
Renters would pay, too. “It would be what we would call a hard operating cost, just like paying for water, sewer, lights, management salaries and those kinds of things,” Peasley explained.
He said that a metro district assessment would either be a “revenue generator,” meant to pay for the city’s operations gap, or “a way to make sure the households pay some amount of money to common maintenance of community assets that are not covered by the city — say, for example, smaller parks the city is not taking over.”
Referendum 5A, approved in 2017, authorized YVHA to collect one mill of property tax on homes and commercial property in Steamboat and the surrounding Steamboat Springs Area Fire Protection District.
That levy, which costs homeowners about $36 more in property tax for every $500,000 of assessed value and commercial property owners about $145 more in tax for the same assessed value, is expected to annually generate about $1.6 million each year.
YVHA has also suggested that it would consider instituting a real estate transfer fee on all property sales within Brown Ranch.
“What we’re looking at is 1, 1.5, maybe 2% on the for-sale product,” Peasley said.
A rate in that range would likely generate a large amount of revenue early in the Brown Ranch development process, as initial sales of homes kick off, but then decline later.
“Basically it looks like a big camel’s hump (on a graph) at the beginning and then stabilizes,” Peasley said. “It will bring about $300,000 a year after the initial sales are done. There would be something in the realm of $16 million or so that would come in on initial sales.”
The Colorado Supreme Court has ruled that real estate transfer fees are consistent with TABOR. That 2018 decision makes clear, though, that Steamboat cannot be involved in their collection.
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