Letter to Town Councils of Crested Butte and Mt. Crested Butte, County Commissioners, and the community-at-large

July 29, 2019

To: Town Councils of Crested Butte and Mt. Crested Butte, County Commissioners, and the community-at-large:

On August 6th, the County Commissioners will be voting on Gatesco’s request for a one-year extension of the preliminary plan application deadline for the Brush Creek Project, a workforce housing development planned for the Gunnison valley. As this vote approaches, I would like to address several questions that have been raised, but will begin with some basic background information:

Background:

The tract is owned by Gunnison County, Crested Butte Mountain Resort (CBMR, now Vail Resorts), the Town of Mt. Crested Butte, and the Town of Crested Butte. When they purchased the property in 1998,  they entered into a Memorandum of Agreement that allowed the parcel to be used for certain uses, including affordable housing.  In 2016, the four owners put out a Request for Proposals (RFP) and a Request for Qualifications (RFQ) for the development of that project, and Gatesco responded with a proposal for 240 units, which was unanimously selected by the owners.

The Gatesco project included an indoor transit center, a paved parking lot for at least seventy vehicles, and underground parking garages. Approximately 65% of the units would be deed restricted to be made available to those with an annual income less than 180% of the area median income (AMI), and 50% would be further restricted to households earning less than 120% of AMI. Rental rates on the restricted units would be limited to a maximum of 30% of household income. In return, the price of the tract would be reduced to compensate for the lowered revenue that would be generated because of the reduced rents. Gatesco’s was the only proposal not asking for taxpayer funds or for tax exemptions, agreeing to be subject to the standard property taxes in the County. 

Three of the four owners need to agree to the submittal of the preliminary plan application and the sale of property. 

Question 1. Why is Gatesco requesting this extension of this deadline?

In August 2018, the Gunnison County Commissioners approved Gatesco’s sketch plan application with a reduced 180 units and forty additional conditions. The County and CBMR were amenable to a sale of the property and submittal of a preliminary plan based on these conditions. However, over the course of several months, culminating in a January 22, 2019, memorandum from the Town of Crested Butte to the County, the Towns of Crested Butte and Mt. Crested Butte developed three additional conditions for the project to move into preliminary plan. The conditions are: (1) further reduction in the number of units to 156; (2) setting aside 5 acres of the property (over 1/3 of the property included in the RFP) for intercept parking or other uses; and (3) requiring 2 off street parking spaces per unit. This process consumed six of the twelve months provided to develop a preliminary plan after the sketch plan is approved. Developing a plan that could address these conditions to the maximum extent while maintaining feasibility required additional time. 

Question 2. What is Gatesco’s response to the additional conditions imposed by Crested Butte and Mt. Crested Butte?

Gatesco has concerns with the cumulative impact that these conditions, in addition to the conditions imposed by the sketch plan approval, would have on the cost of the project and the desirability of the project to prospective tenants.

For example, the reduction to 156 units, while maintaining the same proportion of deed restricted units, reduces the number of unrestricted units that can be rented out to cover the significant fixed costs associated with the project. 

The set-aside of five acres for future uses including intercept parking significantly reduced the developable area below what was contemplated during the RFP and sketch plan processes. The location of the set aside was not specified. If the five acres was located on the flatter parts of the property, the construction of workforce housing units would be squeezed onto more challenging terrain, dramatically impacting construction costs. 

All of the data, including the 2016 Housing Needs Assessment, suggests that off street parking requirements have resulted in developments that over-supply parking spaces, driving up costs, reducing affordability for tenants. Overly burdensome requirements also negatively impact livability by reducing open space. As recognized by the Gunnison County Land Use Resolution, workforce housing projects, which often have smaller dwelling units, demand less parking than a market rate project. No municipal code in the Gunnison Valley would require two parking spaces per dwelling unit for a multi-family project such as this one. 

Question #3. What has Gatesco done to respond to these conditions by Mt. CB and CB and secure an agreement from at least one of them?

By the time the two towns had sent their letter outlining additional conditions, Gatesco had been selected to develop and own a 76-unit workforce housing project in Gunnison located across from the Recreation Center (the “Gunnison Project”). This approval was formalized in a written contract on July 22, 2019. Gatesco hopes that permits can be issued to begin construction sometime in September so that the property can be completed by Spring of 2020.

With the approval of the Gunnison Project, Gatesco feels that it could make a 156-unit property viable at Brush Creek. The combined projects would be 232 units and by operating and developing them together there can be substantial cost savings: the properties could use the same architectural plans; the same work crews could be used to build both properties; the same management staff could easily manage both properties; and construction and operating supplies would be identical at both properties, creating an economy of scale to save on costs.

Gatesco’s internal team has also worked with outside consultants to evaluate the three conditions imposed by the Towns and to develop a plan that addresses those conditions to the extent feasible. 

Accordingly, Gatesco believes its position has improved and that it is better able now to meet the conditions requested by the towns. An extension is necessary in order to wrap up those negotiations.

Question 4. To what extent can Gatesco meet the new conditions imposed by the two towns? When will Gatesco respond?

Gatesco anticipates seeking an adjustment to the new conditions as follows:

  1. Gatesco will agree to construct 156 rental units. The revised site plan places these units predominantly on the flatter sections of the property to keep construction costs under control. The elimination of for-sale units also enhances feasibility. The overwhelming majority of deed restricted units coming online in the north valley are for-sale projects, and recent developments in the Town of Crested Butte suggests that the demand for for-sale units may be limited. Meanwhile, all of the statistical and anecdotal evidences shows the demand for workforce housing is not going away. We strongly believe that a rental project is the appropriate solution. The elimination of underground parking, economies of scale from the Gunnison Project, and other modifications also support the feasibility of a 156 unit project.
  2. Increase the set-aside for transit center parking from the seventy-vehicle requirement to a two acre requirement, which should accommodate approximately 200 parking spaces.
  3. Adjust the off street parking requirement from 2 spaces per unit to 1.5 spaces per unit. Such a ratio is more consistent with the municipal codes throughout the Gunnison Valley, and more commensurate with the number of studio and one bedroom units included in this project.
  4. Allow Gatesco to request necessary adjustments to the forty-one current conditions to ensure economic viability, primarily by adjusting the ratio of larger units to smaller units.
  5. Allow Gatesco to request an increase in the number of lower-income units after the property has reached at least 90% occupancy for three years. Such a request would be subject to all of the same LUR conditions in effect and the same public processes to which any new request is already subject.

If the county grants the extension on August 6th, then as soon as either town is able, Gatesco would like to schedule a workshop meeting with each town to discuss these proposed solutions.

Question 5. Why has Gatesco not done any water tests as required by Condition 28 in the Preliminary Plan?

Gatesco’s hydrological consultant has been monitoring water levels in the existing well on the property for the past two years. At this point, there is no evidence that one or more wells on the property would not be able to provide an adequate physical supply of water for the project without injuring existing nearby wells. It will cost tens of thousands of dollars to complete the specific type of pumping test required for the preliminary plan, and it is not practical to expect Gatesco to invest that much money without Condition 1 (approval by three of the four owners) being met first.

Question 6. Why has Gatesco failed to apply for sewage treatment per Condition 30? 

It could cost as much as $100,000 to fulfill this condition. Gatesco’s engineering firm has the application ready to submit to the East River Regional Sanitation District (ERRSD) and has met with the board of the ERRSD about treatment options.  However, as with Question 5 above, it is impractical to expect ERRSD or Gatesco to expend the time and cost required when Condition 1 has not been resolved.

Question 7. What is Gatesco’s position on the Transit Center?

Because Gatesco is proposing a project with reduced units—and thus reduced revenue—its new plan will not include a transit center built at Gatesco’s cost. Alternatively, it will offer to provide an indoor waiting area with accessible bathrooms as an extension of its on-site management office. 

Question 8. What will Gatesco do if the extension is granted to move forward to completion?

Gatesco’s planned timeline is:

August through September 2019: work to obtain consensus with Crested Butte and Mt. Crested Butte for a plan that has 156 residential units, but with modifications to the other two conditions as described above. 

October 2019 through August 2020: Develop and submit the preliminary plan to the County, conduct all necessary water tests and finalize sewage treatment plan.

August 2020 through May 2021: obtain approval of the preliminary plan

June 2021 through August 2021: obtain approval of the final plan

September 2021: Obtain permits, begin infrastructure site work and building construction

By spring of 2022: have at least 25% of the projects ready for move-in

By end of 2022: complete the remaining 75% of the project

With construction on the Gunnison Project only weeks away, I have grown even more committed to this community and to helping it solve its out-of-balance housing situation.

I appreciate the opportunity to work with the many stake-holders in Gunnison County to address this solution. It is humbling to see the dedication, experience and commitment of so many people.

I respectfully request that the extension be granted.

Sincerely, 

Gary W. Gates, Jr.

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