Future in flux for Aspen’s worker housing | AspenTimes.com

Future in flux for Aspen’s worker housing

Carolyn Sackariason
Aspen Times Weekly

Paul Conrad Aspen Times Weekly

ASPEN ” The future of Aspen’s affordable housing program is in as much limbo as the people it aims to serve.

The city of Aspen has taken an aggressive approach to housing its working class and has more deed-restricted units than any other resort in Colorado, but the well-established program recently hit several bumps in the road.

City officials have come under intense scrutiny in recent months over the way they managed (or mismanaged) a large affordable housing development. They also spent $31 million last year to buy four pieces of property for future development, and thus have exhausted the housing fund.

As a result, they are rethinking how to complete the largest local housing project to date ” Burlingame Ranch, located across from Buttermilk on the north side of Highway 82. And that process involves not only the size, shape and number of residences, but also how to pay for them.

When city and county elected leaders met last year during a two-day “housing summit,” it was determined that the need to house local workers is more crucial than ever for the resort community to sustain itself.

The Aspen Pitkin County Housing Authority houses an estimated 23 percent of the work force, which is no where near its 60-percent goal. And many observers say a day of reckoning is approaching for employers, who are finding it nearly impossible to attract and retain workers.

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A quiet crisis is going on behind the scenes in many businesses that cater to the rich and must provide high-quality service. High-end luxury hotels can barely keep their rooms clean because they can’t find maids willing to commute three hours a day for $12 an hour. Hotel managers who run those properties fear they may lose their status in the industry.

And the middle class, composed mostly of people who own and operate businesses, is being priced out of downvalley communities, where homes now cost more than $1 million. More than ever, officials fear Aspen will become a community of second-home owners and those who serve them.

In the past, the city has built housing on a pay-as-you-go basis, using revenue from a 1 percent Real Estate Transfer Tax (RETT), and the housing portion of the .45 percent sales tax (the rest goes to day care). But officials recently decided to switch to a “land-bank and borrow” strategy.

“The pay-as-you-go scenario didn’t look like it was going to meet the needs,” said City Manager Steve Barwick. “The idea is to leverage assets to do more projects.”

The city intends to borrow against its housing-related revenues, but both taxes are set to expire in coming years. Voters this fall will be asked to renew them.

The RETT and housing portion of the sales tax together generated nearly $11 million in 2007, according to city officials. It’s estimated that the sales tax, if extended, would grow at a rate of 4 percent. The RETT is predicted to grow at 5.5 percent.

However, the current sluggish housing market is showing how volatile the RETT can be. Year-to-date housing RETT collections through July are 35 percent behind 2007 and 24 percent behind budget. So far this year, $3,714,935 has been collected, according to Don Taylor, the city’s finance director.

Clearly, revenue generation from those two taxes won’t immediately pay back the fund and enable officials to continue building more work-force housing. The only option is to ask voters to borrow against future tax revenues through what officials hope will be tax-exempt bonds.

The city is seeking an Internal Revenue Service ruling that would authorize tax-exempt financing for the construction of for-sale work-force housing. Tax-exempt bonds are typically issued for rental housing. The savings with a tax-exempt bond rather than taxable construction financing could be substantial, according to city officials.

A plan was scrapped recently to ask voters this fall for as much as $75 million in bonds to pay for last year’s land acquisitions, and to build housing at Burlingame and other city-owned properties.

The bond question was put on hold partly because of the controversy surrounding Burlingame. Last spring it was discovered that an information error in a 2005 city-initiated brochure failed to account for tens of millions of dollars in the project’s total cost. The number used in the brochure was the construction bid for housing only, and didn’t include other costs such as land, infrastructure, and design and engineering work. City officials have said those costs should have been included and the omission was a mistake. They have since apologized.

But other factors have added tens of millions of dollars to Burlingame’s costs, including changes made by several City Councils and increasing construction costs.

Because of the rising costs and the brochure controversy, elected officials acknowledged that voters would be reluctant to approve funding for phases two and three at Burlingame. Phase one is complete, and includes 84 multi-family units and seven single-family homes.

Now a new plan is under way for Burlingame that could increase the project’s density by 57 units. By selling more units, the city could reduce its per-unit subsidy for the homes. Depending on the project’s eventual size, it could cost as much as $50 million to finish phases two and three at Burlingame.

City voters will be asked an advisory question this fall that seeks permission to build as many as 300 units instead of the 236 approved by voters in 2005. Sixty-seven percent of current Burlingame homeowners must also sign off on the proposed new density.

Once officials determine how many units to build and how to build them ” modular construction is being considered to lower costs ” then voters will be asked to borrow.

“Something similar [to the proposed Burlingame bond proposal] could be asked in the spring, but right now we have to decide how big Burlingame is going to be and who our partners are going to be,” Barwick said.

The Burlingame controversy also led city officials to hire two outside firms to audit the financial controls and management of the project. Those reports recommended several changes, including the establishment of a separate city development department to oversee large, multiyear capital improvement projects.

Barwick is currently setting up that department and will likely hire a new employee and reconfigure some current positions.

“We may become less involved in the development side,” he said.

While Burlingame is the city’s top affordable-housing priority, other projects are in the works.

Of the four parcels purchased last year, the biggest is the 4.64-acre, $18.25 million BMC West Lumberyard, which could accommodate up to 100 units.

The city also bought 802 West Main St., a 9,000-square-foot parcel for $3.7 million; 488 Castle Creek, 35,895 square feet for $5.4 million; and 517 Park Circle, 14,458 square feet for $4.15 million.

The city will look to the private sector and public entities to partner in future projects, which could house hundreds more people several years from now.

Officials also have contemplated developing a small parcel on the east end of town called Shadowood, as well as adding second floors onto the city-owned Red Brick and Yellow Brick buildings in Aspen’s West End. Another option to include housing units in a proposed new civic redevelopment on Main Street, currently known as the ZG Master Plan.

How to pay for those projects will likely come in another bond question to voters in a year or two, Barwick said.

“It will be an interesting discussion with the community at that point because it will be about how much do you build and who is it for?” Barwick said.

csack@aspentimes.com

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