City is land rich, cash poor
September 21, 2009
ASPEN – City officials are reviewing a dozen or so proposals from builders who want to build affordable housing on two publicly owned properties, one on Main Street and the other at the base of Smuggler Mountain.
The city of Aspen over the past two years has depleted its housing fund by buying several pieces of property totaling more than $30 million. As a result, there is no money left to actually build affordable housing.
“We’re not exactly rolling in cash,” said Assistant City Manager Barry Crook, adding the city is land rich and cash poor in its affordable housing program. “But If you have land, you’re in a pretty good position.”
So the city is turning to the private sector for help. In June, the city put out a request for qualifications (RFQs) to attract developers who are interested in partnering with the government to build more than 24 housing units. The projects are slated for 802 W. Main St. and 517 Park Circle.
The competitive bidding process asked developers to provide their specific plans, such as a project’s overall vision; a detailed financing proposal; a development pro-forma; possible ownership stakes and a host of other details.
About 12 proposals from area builders came in before the Aug. 21 deadline. City officials and a review committee in the coming months will consider them and bring what they think are the best ones to the Aspen City Council for approval.
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“We got a very good response with strong proposals,” said Scott Miller, the city’s capital assets manager. “These are people who have a lot of experience.
“We’re open to all suggestions.”
The proposals include financial models that combine borrowed money, tax credit financing and equity from the companies, which incorporate design-build teams. Pro-formas for each of the properties contemplate everything from a few affordable housing units to as many as 30.
“There are all kinds of ways to do it,” Miller said. “It would be little or no capital from the city … we have the land, and we think that would be enough.”
Council members gave direction earlier this year that they wanted the proposals to focus on low- and mid-income one-bedroom units that are both rental and for sale. The units would be put into the Aspen-Pitkin County Housing Authority inventory.
Given the current economic environment and the projected revenues for the city housing fund, officials recognize the challenges in funding new affordable housing. Exploring public-private partnerships is one option to build private capital and develop more units faster – rather than waiting for public dollars to accumulate and build housing several years from now.
And public/private partnerships fuel the local construction industry, which has slowed dramatically as a result of the recession.
“It’s a way to put people to work,” Crook said.
The Real Estate Transfer Tax (RETT) generates revenue for the city’s affordable housing fund. The so-called “150” fund has operated in a deficit for a couple of years – ever since the council made a policy to land bank several pieces of property.
The city of Aspen since 2007 has spent $31 million on land purchases for affordable housing, including the $18.25 million BMC West property by the Aspen Business Center. The city also bought 802 West Main St., a 9,000-square-foot parcel for $3.7 million, and 517 Park Circle, a 14,458-square-foot property for $4.15 million.
As a result of those acquisitions, the city had to borrow $4.6 million from the Wheeler Opera House fund to cover affordable housing expenses that normally would be paid out of the program’s 150 fund. City officials expect to pay the Wheeler fund back by the end of 2010.
City Finance Director Don Taylor said the RETT is expected to generate $5 million this year, of which $2.9 million will be paid back to the Wheeler. Other expenses this year that the fund will pay are operational costs, debt service at Truscott and development fees for the second phase of Burlingame Ranch.
Projected revenues for the RETT are much lower than what it has generated in the past. Taylor said the tax will bring in $4.8 million in 2010 and $4.7 million for 2011. That’s compared to $11 million in 2006; $9.7 million in 2007 and $5.7 million in 2008.
Miller said more public/private partnerships for developing affordable housing on the city’s properties will likely become the trend.
“Regardless of how the economy is going, this should be part of our plan,” he said. “It makes good business sense.”
The city also is negotiating with the Aspen Skiing Co. and the Music Associates of Aspen (MAA) to lease a publicly owned parcel and build seasonal housing for the winter and summer.
The Skico plans to absorb the costs of building affordable housing at 488 Castle Creek Road, a 1-acre site that the city purchased in 2007 for $5.4 million. The MAA would partner with the Skico in financing the project, and the two entities would pay the city to rent the land.
The three entities have come up with preliminary drawings that include creating between 70 and 100 bedrooms. Current discussions revolve how to match demand for winter and summer for the Skico and the MAA.