On July 2, the Town of Pagosa Springs formally lent its support to a Montrose-based developer, Colorado Outdoors LLC, for a More Housing Now grant application and also voted to enter into a developer agreement with the company.
The grant funding, which the town is required to be the applicant for, would come from the Colorado Department of Local Affairs (DOLA) and would be for up to $2 million toward public infrastructure improvements that would serve the proposed Pagosa Peaks apartments, explains an agenda document on the matter.
The developer is proposing 96 middle-income rental apartment units and would be part of a 99-acre major subdivision development east of Pagosa Springs Medical Center.
The apartments will serve those earning between 80 percent and 120 percent of the area median income (AMI), with each apartment building containing 24 units, the document states.
Part of the development would accommodate a 30,000-square-foot building for the Archuleta County administration offices.
“These two projects are proposed to occur as part of a phase one of the proposed Major Subdivision development,” the document states.
The grant funding would help the developer construct these apartments below market rate, creating moderate-income rental apartment units in the community, the document states.
Community Development Director James Dickhoff explained that the public infrastructure, to which the funding would be applied, “could be roadways, could be sidewalks, it could be water, sewer, electric — things that will help serve this proposed housing development.”
He noted that with the amount of roadways and utilities that would need to be installed to serve the development, the town would probably apply for the full $2 million.
He explained that, in addition to the resolution supporting the grant application, the town would also need to enter into a developer agreement with Colorado Outdoors LLC.
He said that the developers, Heidi and David Dragu, were in the room at the meeting, and that “this was an opportunity for the town to apply for a More Housing Now Grant … for the benefit of this proposed housing development.”
The grant funding would require a 25 percent match, which the developer would be fully responsible for, as well as a 30-year deed restriction to ensure an average of 90 percent of AMI is maintained for the entire Pagosa Peaks apartment development, Dickhoff explained.
The rental costs of the apartments would be geared toward the so-called “missing middle” income level, or AMI level, as other grant and tax credit programs are more aimed at aiding development projects geared toward lower income levels, Dickhoff explained.
The project’s developer, David Dragu, explained that the project is aiming to fill the gap between the market rate and the rate of Low Income Housing Tax Credit (LIHTC) projects, usually falling between 60 percent and 80 percent AMI.
Dickhoff explained the application is due on Aug. 1, “so there’s a little bit of leg work to do between now and then,” adding that the developer will “do a lot of that legwork.”
He added that this is “a great opportunity” for the town to indirectly support local workforce housing, rather than becoming directly involved in the housing business.
“This is a developer who is willing to work with us, and we are willing to work with them to help them make their project a reality, and it’s pretty rare that we get developers that are really committed to workforce housing and to a 30-year deed restriction,” he said.
The developers will also be applying for Proposition 123 funding. The town would not need to be a party to these applications, he added.
A concept plan for the apartment complex was available and presented at the meeting, with Dickhoff explaining that the conceptual plans are only preliminary, because they have not yet gone through the town’s planning commission review process.
“So, in no way would this approval of submitting the grant application supersede the actual processes that the development has to go through for their proposed development in compliance with our development code,” he explained.
David Dragu said that his development company “has a lot of experience and works exclusively in rural areas, small towns, and small cities across the western part of the state.”
He explained the company’s experience includes multifamily housing developments, adding, “We’ve done it in Colorado Springs and on the Western Slope, and we’re currently doing one in Montrose and in Moffat County.”
He added, “And, we do have a track record of getting these grants, working with towns and cities, and that includes state funding, specifically DOLA funding.”
The proposed apartment development would be “geared towards the folks that run our towns — the nurses, police officers, really what we refer to as ‘the missing middle,’” he said.
The project “would fill the gap” between the LIHTC project near Walmart and the standard market rate, he said.
“This funding is really critical to deliver the AMIs that we want,” he said, explaining that building workforce housing costs the same as market rate developments, “but we have to limit the rents, and so this really makes it possible by providing those public improvements and making the deal work.”
He explained that multifamily housing developments, as opposed to single-family units, are critical to allow the local job market to grow, as people “need a place to land” when they take a new job in town.
He also added that multifamily housing can serve as an important transition for members of the local workforce who are seeking to transition from the rental market to homeownership.
In addition to the apartment units, the subdivision development would include smaller single-family homes and larger homes, “so there’s an opportunity there to move up,” he said.
Heidi Dragu added that the developers are reviewing the housing needs of the community and, as part of that, have talked to local employers about the housing needs of their employees.
She said that there’s “a story out there, a lived experience of business owners and workers, and we want that story to inform the development of our project.”
Council member Mat deGraaf wanted clarification about if the proposed apartments are a single prong, “where you have the multifamily units as the workforce units, and then there’s the section for the county [administrative building], and then the subdivision, with the subdivision being all market-rate stuff, right?” he asked.
The subdivision would be “market-rate single-family homes,” David Dragu clarified.
Heidi Dragu added, “I think the idea is to have a pathway to homeownership. One thing that we’ve learned … is, you know, having the opportunity to move within a neighborhood is really powerful for folks. Maybe you start in a rental, and as your earnings increase … you’re able to purchase something in that same neighborhood.”
Council member Brooks Lindner asked the developers, “Why do you want to do this development in Pagosa?”
“First of all, we love the community, and have been coming here for 20 years. We have a home off of Piedra. There’s a big need,” David Dragu answered. “We know a lot of businesses in town. They are our friends. We think there’s a gap in that workforce housing AMI and we’ve seen what it’s done in Montrose. We’ve seen that housing has changed that town for the better.”
He added that housing was the key to recruiting and maintaining the workforce in Montrose, “so that’s the reason.
Mayor Shari Pierce asked about the timeline of the project, to which David Dragu responded that, if all goes as planned, the apartment project would break ground in 2025, but that the rest of the subdivision could take 15 to 20 years to build out.
Council member Gary Williams added that the Town of Pagosa Springs “is committed to workforce housing, and we’re committed to working with developers to provide it.”
Dickhoff added, “This would be a big win for our community.”
When a motion was made in support of the resolution to submit the grant application and to enter into a developer agreement with Colorado Outdoors, it was seconded and passed unanimously by the council.
derek@pagosasun.com
