Aspen asks voters to approve $93 million affordable housing plan

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By Carolyn Sackariason
pitkin county correspondent
March 21, 2008

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ASPEN — Aspen voters likely will be asked this fall to approve $93 million in debt to pay for City Hall’s ambitious affordable housing program that includes hundreds of new homes for the working class.

City financiers plan to present to the Aspen City Council next week a financing scheme that includes a November ballot question which asks citizens to issue three bonds, as well as renew two taxes that are the primary revenue sources for the city’s housing fund.

The idea is that the city would borrow against future revenue generated by the 1 percent Real Estate Transfer Tax, or RETT, and the housing portion of the .45 percent sales tax.

That means no new taxes will fund the housing program, said Assistant City Manager Bentley Henderson.

“We’re merely asking to accelerate those funds,” he said.

The financing plan has to be approved by the City Council, which would decide if it should go on the November ballot.

The first bond would be for $29.6 million and would be tax exempt. It would pay for land acquisitions already made by the city of Aspen and have a 30-year repayment schedule.

The second bond also would be tax exempt and would be for $12.7 million. It would pay for developing rental seasonal housing at 488 Castle Creek, a 35,895-square-foot property the city bought last year for $5.4 million. That bond also would have a 30-year repayment schedule.

The third bond is the largest at $50.2 million and would be taxable. It would be repayable in 10 years, and would pay for the construction and financing of for-sale housing, specifically at Burlingame Ranch.

Those bonds are dependent upon renewing the RETT, which expires in 2024, and the sales tax dedicated to housing, which sunsets in 2010.

“All scenarios we’ve run assumes these taxes are renewed,” said Scott Newman, City Hall’s senior financial analyst for debt and investment management. “Both are very healthy and essential to any future development.”

The two taxes combined generated nearly $11 million in 2007. It’s estimated that the housing portion of the sales tax, if extended, would grow at a rate of 4 percent. The RETT is predicted to grow at 5.5 percent. Those are conservative estimates, Newman said.

Newman, Henderson, Chris Everson, City Hall’s affordable housing project manager and Steve Jeffers, the city’s bond advisor, presented the financing plan to the Aspen-Pitkin County Housing Authority board on Wednesday. The team will take the same presentation to the City Council on Tuesday, March 25.

Without the extended tax revenue, the housing fund would only be able to cash fund 263 units over the next 30 years, which is inadequate, Newman said. The 2000 Aspen Area Community Plan called for 1,300 new affordable housing units to be built. So far, 652 have been constructed.

The housing fund cannot cash finance future housing projects envisioned by City Hall without ongoing revenue streams.

Newman said 415 units can be developed in the next eight years with the proposed plan. Those units would be part of the next phases at Burlingame Ranch and the seasonal apartments at the Castle Creek property.

“If we want to break ground on anything next year, we need voter authorization to issue debt,” Newman said. “We want to leverage existing funds and have flexibility into the future.”

If voters approve the debt, it’s predicted that the housing fund will have a $60 million balance in 2018. That balance includes revenue from selling new housing units, which would help offset the debt.

“By doing this, we are putting ourselves in better shape for the future,” Everson said.

The city of Aspen last year spent $31 million on land purchases for affordable housing, including the $18.25 million BMC West property near the Aspen Airport Business Center.

City financiers also propose asking voters in 2010 for a $50 million bond that would be taxable. It would pay for the construction and financing for housing at BMC West.
While other governments have affordable housing programs, Aspen’s is unique not only because it has a larger inventory than most but also because of how it’s paid for.

“The one major difference between us and everyone else is our financing,” Newman said. “While we are ahead of everyone else in funding, it’s just still not enough ... the costs are so great that we just can’t cash fund any longer.”

Jeffers said borrowing against future revenue allows the city to create a positive fund balance dedicated solely to housing.

“We’re subsidizing at a level so great that over time you run out of money,” he said.

Housing Board member Marcia Goshorn expressed concern that if all the questions are asked at once, there’s a good chance that voters will shoot them all down.

“They could go down in flames,” she said.

Newman said that’s why the bond requests and tax renewals will be presented in one question with an umbrella concept of supporting the affordable housing program. Staff is currently working with a consultant in drafting ballot language.

Newman also said that Goshorn’s concern is shared with others and that is why they are getting an early start.

“We need time to do the proper campaign and get the information out there,” Newman said.