Developers of Steamboat 700 could spend $72 million on phased projects | SteamboatToday.com

Developers of Steamboat 700 could spend $72 million on phased projects

Mike Lawrence

— A city financial official said last week that nearly all of the monetary risk associated with Steamboat 700's capital projects lies with the developers rather than the city.

The financial plan for the proposed Steamboat 700 annexation estimates $72 million in potential capital project funding from developers, staggered throughout years if not decades. The money would fund projects including improvements to U.S. Highway 40, sidewalk and shoulder improvements on roadways near the annexation, new mass transit and public works facilities, a fire station, a public safety building, a community center and more. Capital projects would be phased with the development of Steamboat 700.

The capital facilities phasing plan in Steamboat 700's annexation agreement with the city assigns capital projects a specific share of cost, by percent, for developers, the city and other funding sources.

The city's financial risk related to the annexation has been a topic of local debate. Dan­ny Mulcahy, Steamboat 700 principal and project manager, said last week that the risk is developers' own. According to the annexation agreement, Steam­boat 700 developers would advance, or loan, $53 million of the $72 million to the five metropolitan districts that would make up the development. Those loans would occur in phases as the development grows. The districts then would reimburse developers with revenue from property taxes. The other $19 million is the municipal bond capacity for lending from other investors.

Mulcahy said if the market does not generate enough home sales and associated property tax revenue at Steamboat 700, developers will be holding the bill.

"We're taking the risk of investing the $53 million, whether the market will accept it or not," Mulcahy said. "At the end of the day, we're taking the risk of getting the money back."

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Bob Litzau, assistant finance director for the city of Steamboat Springs, agreed with that assessment last week.

"The amount that the city is on the hook for, that the city has committed to, is almost nothing," Litzau said, referring to capital projects. "The one thing we have a commitment on is some of the transit stuff, but the risk there is pretty small."

At 1,500 dwelling units, Steam­boat 700 would be required to pay 20 percent of the cost for two transit buses. The remaining 80 percent would be funded by the city and grants, which Litzau said have been a stable funding source in recent years.

The number of dwelling units at Steamboat 700 is the primary determinant of when capital projects are built. A new community center that could cost an estimated $3.5 million in 2009 dollars and would be funded entirely by Steamboat 700, for example, is required at 1,000 dwelling units.

On the road

Transportation projects are the majority of the capital phasing plan.

Steamboat 700 would advance $5.5 million for U.S. 40 improvements before development of the first unit. That would be followed by a series of improvements starting with funds for design and right-of-way work on U.S. 40 from just west of 13th Street to Downhill Drive, including improvements to the highway's intersection with Routt County Road 129, or Elk River Road. Steamboat 700 would pay 77 percent of those costs, with the remainder assigned to the Colorado Department of Transportation, the Federal Highway Administration and other potential annexations west of Steamboat, such as 360 Village.

Litzau said assigning percentages of cost, rather than dollar amounts, is safer for the city because it eliminates risks tied to inflation. For example, if the city in 2009 required Steamboat 700 to pay $3 million for future U.S. 40 improvements, and that work turned out to cost $10 million when the work is done in 2015, hypothetically, the city would have to pay a larger share. Percentages are stable, Litzau said.

U.S. 40 work in the capital phasing plan extends from 12th Street to Steamboat West Boulevard, the primary entrance into Steamboat 700. Work also is slated for ancillary roadways including C.R. 129 and C.R. 42. The projects are detailed according to last year's National En­­vironmental Protection Act study of U.S. 40 improvements west of Steamboat. Much of the work involves widening the highway to four lanes of through traffic and adding multiuse pedestrian pathways. City engineer Laura Anderson said pedestrian underpasses are planned for major intersections on U.S. 40 west of Steamboat.

Cost questions

The $72 million total capital cost for Steamboat 700 is adjusted for inflation. The annexation agreement's financial plan assumes 4 percent inflation per year for capital projects. In 2009 dollars, Steamboat 700 would fund about $57 million of projects totaling $97 million in cost. About $28.2 million of Steamboat 700's total, in 2009 dollars, would go toward projects funded entirely by Steamboat 700. The remainder would be for shared projects.

Litzau said the involvement of other funding sources for capital projects makes the city's cumulative commitment to capital projects relatively small.

Mulcahy said at least 30 percent of Steamboat 700's projected capital costs would "pay for existing city infrastructure," meaning projects already in the city's capital improvements plan.

That plan, part of the city's 2010 budget, includes $21.5 million for U.S. 40 improvements and a total of $4.3 million for New Victory Highway and C.R. 129 improvements from last year to 2014.

City Manager Jon Roberts said future funding for capital improvement projects is not secure.

"The five-year capital im­­prove­ment program, other than the current year, is more like an identification of needs that you have, and it isn't necessarily related to projected revenues," he said. "Certainly, for the current year, you scale back your capital improvements to meet what your revenue streams are."

Decreasing sales tax revenues have forced significant city budget cuts in the past two years.

"The improvements on High­way 40 are extensive and would occur over multiple years — the schedule on which they occur would be entirely dependent on revenues coming in," Roberts said. "At this time, other than the (U.S.) 40 improvements through downtown, there aren't any secured revenue streams."

Roberts said the initial $5.5 million from Steamboat 700 "would provide some funding to go out and make some incremental improvements to Highway 40, even before the traffic impacts from Steamboat 700 begin to occur."

Overall, Roberts said, the city is viewing capital project revenue from Steamboat 700 as equal to the impacts of the development.

"We took our direction from the West of Steamboat Springs Area Plan, which called for revenue neutrality," Roberts said. "So the revenues that have been identified, according to our analysis, are equal to the impacts."

Financial projections in the annexation agreement cite a total of about $165 million in cumulative property tax revenues generated by the development by 2050.

"That's if things get built, and they can continue to sell lots," city planner Jason Peasley said. "The $165 million is intended to pay for the costs of the development."

Those costs include everything from the $25 million land purchase — for 700 total acres bought by Mulcahy and his Las Vegas partners in 2007 — through consultants, studies, infrastructure, development and more. Mulcahy said last week that home sales would be a source of profit for the Steamboat 700 team.

"There's obviously a lot of risk involved in development," Peasley said. "With that higher risk, they expect higher returns."

Vote on 700

■ Ballots for the mail-only election will be sent to registered Steamboat Springs voters between Feb. 15 and 19. The election ends March 9.

■ Steamboat 700 is a proposed master-planned community on 487 acres adjacent to the western city limits of Steamboat Springs. The project proposes about 2,000 homes — from apartments to single-family home lots — and 380,000 square feet of commercial development that would be built to the standards of new urbanism (dense, walkable and transit-friendly).

Online

■ Learn more about the proposed Steam­boat 700 annexation at http://www.steamboatpilot.com/news/steamboat700/.

■ Learn more about future plans for recommended traffic improvements on U.S. Highway 40 on the west side of Steam­boat Springs at http://www.us40west.com/.

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