Our View: Fiscal neutrality could be costly

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At issue

Fiscal neutrality and Steamboat 700

Our view

Striking balance between public benefit and fiscal impact is no easy task.

Craig Editorial Board, July 2009 to September 2009

  • Bryce Jacobson, newspaper representative
  • Joshua Roberts, newspaper representative
  • Collin Smith, newspaper representative
  • Kim McMurtrey, community representative
  • Doris Zimmerman, community representative
  • Nancy Hettinger, community representative

— Tuesday's Steamboat Springs City Council discussion and ultimate acceptance of a fiscal impact model for Steamboat 700 illustrates a fundamental problem with the West of Steamboat Springs Area Plan and the goal of fiscal neutrality. In our effort to protect existing residents from bearing any financial burden related to west Steamboat development and annexation, we are in danger of creating an adjacent, second-class community where our work force is expected to find attainable housing while being taxed at double the rate for that opportunity.

Further, the very affordability of homes in Steamboat 700 is affected by the increased tax rate that will be imposed on residents and businesses there. And if attainable housing is one of, if not the most, significant public benefits and goals of west Steamboat development, perhaps the community needs to be willing to bear some of the costs of such growth.

The City Council has demonstrated a commitment to making sure Steamboat 700 achieves fiscal neutrality. On Tuesday, during a discussion of the proposed master-planned community's operational fiscal impact, Councilwoman Meg Bentley made a motion to reject the impact model on the grounds that it showed an annual operating deficit of about $50,000 at build-out. Councilman Steve Ivancie seconded the motion before Steamboat 700 attorney Bob Weiss jumped in with a proposal: an additional metro district tax for Steamboat 700 residents that would raise $50,000 a year once build-out was complete. The council unanimously approved the proposal.

At face value, the additional tax burden for future Steamboat 700 residents seems appropriate, if not deserved. But taken in the context of the mounting taxes facing those residents, it raises serious questions about whether the goal of fiscal neutrality runs counter to one of the fundamental goals of west Steamboat growth - namely, the creation of attainable and affordable housing for our work force. As the demands placed on the developers increase, that goal becomes less and less achievable.

When the West of Steamboat Springs Area Plan was updated in 2006, one of the primary goals was to ensure the plan was in fact achievable - particularly as it relates to the creation of affordable and attainable housing. But one of the plan's other key goals sets up an inherent conflict: to "ensure that the fiscal impacts on the citizens of Steamboat Springs are minimized and the benefits to the community are commensurate with or greater than the costs to the community."

How, as a community, do we quantify the benefits of affordable and attainable housing? Most Steamboat Springs residents agree that the community's character is one of its most appealing attributes. That character is grounded in our small-town feel and the fact many of our teachers, food servers, police officers and store clerks, for example, work and live within city limits. A common fear shared by residents here is that Steamboat will become the next Aspen or Vail, where exorbitant home prices and limited growth areas have pushed the working class down valley. The result is less vibrant towns and increased sprawl and traffic.

We certainly don't want to put the noose around the necks of existing city residents, but we, as a community, must consider the ultimate goal of smart, planned growth, and whether our reluctance to foot the bill for any of it jeopardizes exactly what we hope to preserve.

Comments

Karen_Dixon 5 years, 4 months ago

Finally! Someone else realizes that this plan undermines & defeats itself. Creating a GROWTH plan, then including language in the plan that makes it unachievable is in fact a NO-GROWTH plan, attempting to achieve the exact opposite of what it claims to want. (Steve L., perhaps this is the example you were asking for?)

Make no mistake, as long as this community remains desirable, it will grow. Fight it if you will, but growth that happens in an unplanned or ill-planned manner will ultimately cost this community far more.

Smart Growth Principle #5: MAKE DEVELOPMENT DECISIONS PREDICTABLE, FAIR and COST EFFECTIVE: "For a community to be successful in implementing smart growth, it must be embraced by the private sector. Only private capital markets can supply the large amounts of money needed to meet the growing demand for smart growth developments. If investors, bankers, developers, builders and others do not earn a profit, few smart growth projects will be built. Fortunately, government can help make smart growth profitable to private investors and developers. Since the development industry is highly regulated, the value of property and the desirability of a place is largely affected by government investment in infrastructure and government regulation. Governments that make the right infrastructure and regulatory decisions will create fair, predictable and cost effective smart growth.

"Despite regulatory and financial barriers, developers have been successful in creating examples of smart growth. The process to do so, however, requires them to get variances to the codes often a time-consuming, and therefore costly, requirement. Expediting the approval process is of particular importance for developers, for whom the common mantra, "time is money" very aptly applies. The longer it takes to get approval for building, the longer the developer's capital remains tied up in the land and not earning income. For smart growth to flourish, state and local governments must make an effort to make development decisions about smart growth more timely, cost-effective, and predictable for developers. By creating a fertile environment for innovative, pedestrian-oriented, mixed-use projects, government can provide leadership for smart growth that the private sector is sure to support" [www.smartgrowth.org]

Has this municipality really created a fertile environment for Smart Growth? Are we simply using the phrase as a cliche' for appearance sake? Are we trying to blindly uphold all the conflicting, defeating language in The Plan, losing site of the actual intent of The Plan & its mandate of ACHIEVABILITY?

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Fred Duckels 5 years, 4 months ago

These neutrality cost estimates are nothing more than a wild guess. The question is, do we want this project?

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Steve Lewis 5 years, 4 months ago

Karen, I agree: Finally! is right. The Pilot is finally looking at the affordability that SB700 will bring. Long over due! And they still have only scratched the surface. Is it going to be attainable housing? We all agree that was the whole point.

The last I heard from SB700 was an average price per unit of $617,000. (I believe that average includes the 20% deed restricted units, so the true free market unit average would be a good bit higher still.) Is that attainable housing?

Surely we should have had Pilot articles looking at this project's attainable housing numbers. The Pilot should have explored just what "benefit" we are getting before this "settle for less" editorial was written.

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Steve Lewis 5 years, 4 months ago

Karen, I think you and the Pilot editorial, are too quick to suggest the answer is to settle for less than what our plans call for. Too quick to say the plans are impossible to achieve.

In my opinion, you both ignore two obvious counterpoints to your choice that the area plan is the culprit :

1) Neither you nor the Pilot editorial acknowledge a hugely crucial factor - we are in the pit of a very painful, worldwide recession.

You don't think that annexing in the pit of this major recession should change the calculus? The "playing field" is far more hazardous isn't it? If the numbers don't add up, this may simply be the wrong time to annex. It's certainly much riskier guessing future interest and costs now. All this would be easier when the housing market is better stabilized.

The City asked for a smaller annexation from SB700. These high stakes were chosen by SB700.

2) Because of high costs passed on to future 700 owners, both you and the Pilot are choosing to settle for less than our plans call for. Yet neither of you has cast a glance at what SB700's profit taking adds to those passed on costs.

In my opinion, SB700 is taking too much profit by leaving too much of their costs on the backs of those future owners. The recession has hit everyone hard, and may mean that this housing development can no longer meet SB700's short term profit requirements. I don't believe you can blame that on the area plan.

SB700 had the area plan expectations right in front of them when they bought and designed this project. It's disingenuous to now claim the plans are the whole problem.

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Steve Lewis 5 years, 4 months ago

The Pilot has come out and said it with this Sunday's editorial. This annexation cake isn't ready to serve.

What I don't understand is that the Pilot is ready to "settle for less" than our planned goals - but is also on record saying "be sure we do it before the election"? In my opinion, both are terrible advice to this community.

This is yet one more in a string of Pilot editorials that must be music to SB700's ears: "We are asking too much of SB700".

This editorial before the Pilot has even bothered to kick the tires of SB700's actual affordability? What are those attainable housing numbers, Pilot? Please strive for more objectivity. And please strive with us for a result that also meets our area plans.

If we find the two benchmark measures of housing benefit and fiscal neutrality are both failing, isn't it then obvious that this annexation, as proposed, is not yet ready for our approval?

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Karen_Dixon 5 years, 4 months ago

Nice try Steve. You know that I cannot discuss an open application. My comments pertained to language contained within a growth plan that undermines the very type of growth that it claims to want.

You may speak to me & 6 others about specific applications and how they do or do not meet the intent of our community plans and codes on the 2nd & 4th Thursdays of each month @ 5:00 in the evening. Occasionally, we have additional meetings on alternate Thursdays. All meetings are given correct and adequate public notice, therefore, you have an opportunity to schedule your time on any application to which you wish to speak.

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aichempty 5 years, 4 months ago

One of two things is going to happen with this project.

Either the developers will wait until they are guaranteed the profit they want, or they will go ahead too soon and go bankrupt. These people have already demonstrated that they are going to wait until their terms are met, and the rest of it is rhetoric. Nobody is going to sign on the bottom line to invest their own real dollars until they are guaranteed the profit they are seeking.

Either way, accessible housing for the masses is a dream. A few will get it. Most will not. The homes, if they are ever built, will be sold to people who can afford them, and it won't be people who are working hourly wage jobs in Steamboat Springs.

So, let's move on.

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Steve Lewis 5 years, 4 months ago

Aich is likely right. SB700's investors have locked in expectations. It could be their investment is contingent on certain levels of annexation vesting that amount to enhancement of their investment. I expect their payoff was to be within months of annexation.

The unfortunate reality is their investment is now threatened by the crash of our economy. I believe these pressures have shifted more of the project's costs into taxes on the future SB700 residents.

But the price points these units would sell at are subject to another reality. This Pilot editorial is premature, as I said, without first establishing what SB700 home prices will be and when does their phasing make them available.

Will this project achieve attainable housing, the fundamental goal of the West Steamboat Springs Area Plan? When we know that answer, we will have the basis for weighing the Pilot's advice, and discuss what fiscal burden we as a community should be responsible for.

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housepoor 5 years, 4 months ago

Is this correct? A barn village lot for $128K!! That would put the the market value for SB700 lot around 55-75K, now that is affordable!!!

Address: 755 Angels View Way, Steamboat Springs Seller: Clare K. Berkey Buyer: Joel Gabreski Sale Date: 2009-08-17 Sale Price: $128,000 Property Description : Lot 3 in the Barn Village at Steamboat Subdivision. Lot is 0.145 acres. Listing Agent: Buyers Agent:

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Steve Lewis 5 years, 4 months ago

That may be a fire sale. It may be a trend. It may be a long term trend. Who knows.

In my opinion our real estate market, along with much of our local economy, will see its first useful benchmark for better or worse with the bookings for the early ski season, i.e. by late November.

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Steve Lewis 5 years, 4 months ago

Hey Steamboat Pilot, let's do some math!

Danny is pretty adamant the market will rebound well. And either way I think SB700 will still sell for close to earlier projected prices.

The $617K per unit average is on parallel with the $200K for SB700 lots that realtors guessed at a year ago. There's a rule of thumb that a lot's value would be 25-33% of the value of a developed unit.

So let's say the land value is $150K per unit as an average. That would be with infrastructure of water, sewer, etc.

End value after annexation: 2,000 units x $150,000 = $300 million.

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Steve Lewis 5 years, 4 months ago

Costs: $26 million = raw land =SB700 cost $ 2 million = studies required = SB700 cost $ 2 million = SB700 team cost = SB700 cost $80 million = infrastructure = future taxes to buyers $ 1 million = water firming costs = SB700 cost $ 1.2 million = 12.5 AH acres = SB700 cost $ 3 million = interest costs = SB700 cost

That's rough. Hey, feel free to let me know what I've left out.

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Steve Lewis 5 years, 4 months ago

So I get SB700 spending about $40-50 million. The annexation's value to SB700 if approved would be close to $300 million.

$250 million profit, on my napkin anyway.

I obviously don't buy the above Pilot editorial's argument we've already asked SB700 for too much.

Hey, I'd like them to succeed, but we absolutely have to succeed with our goals too. Annexing something shy of our community's goals just doesn't make sense.

Let's be more pragmatic City Council, and for starters, ask SB700 to significantly reduce the tax burden of those metro districts on the future home buyers.

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Fred Duckels 5 years, 4 months ago

Steve, How many developors in this town are smiling today? I have worked for many that dreamed of riches, but when the total was tallied, that was not the result. I fear real estate investments, because when the market turns the product is niether liquid nor portable. I have watched investments take twenty years to return money, few have the staying power. The 700 may make a profit, but at ths point we don't even know if it will be approved. How many of the armchair quarterbacks are willing to risk like this? They are quick to begrudge a profit for those of courage.

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