On May 20, the Pagosa Springs Town Council considered resurrecting the town’s Enclave at Aspen Village workforce housing project, which has been on pause after the town did not receive a Colorado Department of Local Affairs (DOLA) grant.
In 2022, the town entered into a predevelopment contract with Texas-based developer Servitas to build workforce housing on town-owned property and, after several iterations, the project settled on the Enclave site, a three-acre property in Aspen Village south of Walmart.
Servitas proposes to build 70 units on the site, with 12 of those being townhome ownership units and the remainder being multifamily rental units, with the project aiming to provide housing for those earning between 60 percent and 140 percent of the area median income (AMI).
The entire project will average 90 percent AMI for the rental units.
This AMI range has been described by town officials as “the missing middle” that they hope to target with the project, as other projects, such as Low-Income Housing Tax Credit (LIHTC) projects, have targeted a lower range of AMIs.
At the meeting, Mayor Shari Pierce made clear that “no decision” would be made “tonight,” regarding the Enclave project, saying that the purpose of bringing it back before the council was to get everyone “up to speed” on where the town stands with the project.
Garrett Scharton, representing Servitas, gave the council a brief presentation on “where we are now and where we propose to go,” expressing optimism that the town would be awarded Colorado-voter approved Proposition 123 funding, which makes funding programs available for middle-income housing developments.
Scharton explained that Servitas proposes that the town applies for Colorado Housing Finance Authority’s (CHFA’s) Prop 123 Equity Funding program, which would support 50 percent of the total project cost, while the remaining 50 percent of the project could be funded through a certificate of participation (COP).
An agenda document on the matter states that the total cost of the project is estimated at about $24 million.
“Proposed rents would cover the COP and Prop 123 Equity debt service, maintenance, reserves for capital improvements, management expenses, insurance, and all expenses associated with the operation and management of the facility,” the document states.
Scharton explained that if the town went for a larger COP amount, and it rented out the target number of units, that it could actually lower rents in year two and beyond.
The pro forma budget was designed to ensure the project pays for itself through rents and that there are no out-of-pocket expenses for the town, the document states.
“The benefit of this project, as a town-owned project, versus developer-owned, is the town’s ability to deed restrict the units in perpetuity and that rents are less likely to raise to meet CHFA’s annually adopted AMI rent schedule increases,” the document states.
It adds, “The town would have the ability to set rents lower than CHFA rents as long as the entire project averages up to 90% AMI, consistent with Prop 123 Equity requirements.”
Scharton noted he hopes to have the project shovel-ready in preparation for the Prop 123 Equity Funding program application deadline this fall, and that a COP would be “conditional” on if the town is awarded the funding.
One of the reasons he noted that he is more optimistic about receiving the Prop 123 funding, as opposed to the DOLA grant, is that Prop 123 funding is a “permanent” stream approved by Colorado voters.
This means if the town failed to receive funding in the fall round, it could always reapply in the spring, the following fall, and so on and so forth, he explained.
He explained he thinks the town is in a good position now since it completed and approved the necessary housing needs assessment earlier than other municipalities.
He added that the new plan to use in-state “modular construction,” and the project’s potential to sign “master leases” with the hospital and school district, would boost the application.
When opened to questions, council member Leonard Martinez expressed concern that there is a “disconnect” between AMI levels, determined by the census and state numbers, and “what our reality is” on the ground.
Martinez suggested that the average worker in the area could not afford the rents aimed at the AMI range of the project.
“These are really high prices,” he said.
For example, the project proposes 12 studio apartments, each 404 square feet, aimed at 73 percent AMI, at a rental price of $1,223 per month.
During public comment, Martinez’s sentiment was echoed by resident Bill Hudson, who suggested that the AMI levels for the region “are out of kilter with what our community really is.”
He said that the reason for this is that “39 percent of our households are retirees, or they are getting their income from outside this community.”
Hudson suggested the AMI includes retirees with “big pensions” and people “making big bucks” working online for companies located out of the community.
“So, when we look at 100 percent AMI, … that’s not a true reflection of who we are as a working community, and that’s the disconnect” that Martinez referred to, Hudson said.
Pierce reiterated that the Enclave project is intended to meet the demands of the “missing middle” and that LIHTC projects are “trying to help” AMIs below 60 percent.
Martinez asked what range of AMI the housing needs assessment identified as needing the most new housing inventory.
Jeff Sams, the multijurisdictional housing coordinator, responded that the assessment determined that the community needs 434 new units in the 51 to 80 percent AMI range, 38 new units in the 81 to 100 AMI range and 182 new units in the 101 to 120 AMI range.
Council member Brooks Lindner asked what AMI range the proposed Pagosa West development aims to accommodate with its 88-unit multifamily apartment complex.
Development Director James Dickhoff responded that the Pagosa West apartments were aiming to serve “pretty much the same middle income category” as the Enclave.
Lindner wondered if the town would be “competing” with Pagosa West to find tenants to occupy its units and if that would jeopardize the target occupancy level of 87 percent or higher.
Dickhoff stated that he doesn’t see Pagosa Springs becoming “any less desirable as a place to live” in the future.
He added that the demand for housing is already very high, and that the hospital, the school district and other major employers “can’t grow their businesses.”
“They are all kinda strapped because they can’t attract talent here, because there’s just nowhere for them to live,” he said, adding that even the town has had a hard time filling positions “because it’s really hard to find a place to live.”
He added, “Currently, I don’t see [competing with Pagosa West] as being an issue, but certainly things can happen. We could have another pandemic.”
Council member Gary Williams wanted to hear from the town’s financial advisor, Joey McCliney, about the project’s funding mechanisms — Prop 123 and COPs.
McCliney said that he was “in favor of the project,” if the council “is in favor of it.”
However, McCliney expressed he wants the council to be “clear eyed” about the financial obligations it would be responsible for if it goes forward with the project.
He explained that it’s “as serious as a heart attack when you take on this obligation,” adding that it would be “a large amount of debt for a town the size of Pagosa to take on,” and the council would need to “head this on with eyes wide open.”
He added that he agrees with Dickhoff and others that the demand for housing is high in the area and that the town shouldn’t have much trouble occupying the units, which would mean that the town basically would “break even” financially.
He also added that if the town-only sales tax increase ballot initiative passes in the November election, that it would remove a major financial “liability” for the town — the need to pay for critical sewer system repairs that is a consistent budget issue.
Martinez expressed concern that if the town doesn’t “hit its projected occupancy rates” it would open the town up “to exposure,” but added that he thinks the project is important “strategically” for the town’s future growth, to attract talent to the workforce.
Pierce explained that the council should take the information that it had gathered so that it could come back at the June 3 meeting for a decision on if it wants to pursue the Prop 123 funding for the project.
derek@pagosasun.com
>