In workforce housing, what’s the difference?
September 12, 2008
EAGLE COUNTY, Colorado ” It’s evening in Miller Ranch, and residents are just getting home to their families. People wave to their neighbors ” teachers, firefighters and architects ” and kids play in the streets while the mostly friendly neighborhood dogs and cats roam the yards.
It’s a scene the county hopes to create at Stratton Flats in Gypsum, a site that is currently piles of dirt interrupted by a network of pipes. But in a couple months, developers plan to have some model homes up, kicking off the start of what the county hopes will be the valley’s next affordable neighborhood.
Stratton Flats, a partnership between Eagle County, the town of Gypsum and Meritage Development Group, will have 339 homes, most of which will be deed-restricted, meaning they can only be sold to people who live and work in the county.
Both neighborhoods have the same concepts ” they both include deed-restricted homes meant to keep locals in the community and are price-capped. Miller Ranch homes can appreciate up to 6 percent each year, and Stratton Flats has several different kinds of price-caps.
However, the county’s involvement in Stratton Flats has been attacked by some people in the community as risky and inappropriate, while almost everyone agrees that Miller Ranch, an Edwards neighborhood that broke ground in 2002, has been a huge success.
Former county commissioner and Stratton Flats critic Tom Stone, who spearheaded the Miller Ranch developer, said that Stratton Flats in far more of a financial risk for the county.
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With Miller Ranch, the county already owned 110 acres of land in Edwards. The land was purchased for $2 million in 2002 with the intention to turn it into recreation, open space and housing.
The county agreed to contribute the land and waive building fees, partnering with private developer ASW Realty, who built and financed the project and split the profits on the homes half and half, Stone said.
Stone said the 282 homes took about three years to sell, and the county made $3 million in profits on the project, money which was then reinvested in Miller Ranch.
He said he thinks Stratton Flats is much riskier because the county is an equity partner in the project, investing $4.5 million upfront.
“That front end is really risky money,” Stone said. “Meritage couldn’t find an equity partner until the county jumped in. Stratton Flats had talked to banks up and down the valley and no one would take it.”
Other opponents of the project say the county could stand to lose it’s investment if the project flops.
“With the economy the way it is, I don’t want the county holding the bag for $4.5 million if this falls through,” said Republican county commissioner candidate Debbie Buckley.
Edwards is a much more prime location than Gypsum, and people might not be as eager to move downvalley, Stone pointed out.
“The location is tough. The economy is tough,” he said. “Miller Ranch wouldn’t sell out that fast now.”
But County Director of Housing and Development Alex Potente said he doesn’t think the county’s investment in Stratton Flats is any riskier than the county’s investment in Miller Ranch.
“The difference between the two projects is that in Miller Ranch, we committed land to the deal,” Potente said. “In Stratton Flats we committed cash. I think they’re very similar in terms of risk to the county.”
As an equity partner, the developer must pay the county back it’s investment with a 6 percent interest before any profit can be made.
That means the county will get its money back, as opposed to Miller Ranch, where the equity partners had to be paid off first before the county and developer could get any profits, Potente said.
If Stratton Flats “flops,” and the developer abandons the project, the county can step in and take the developer’s place, he said.
In that case, the county would have to take full responsibility for the project, but it could also eventually collect any profits the developer might have gotten, he said.
While the county didn’t invest cash in Miller Ranch, it stood the risk of losing the land, Potente said.
“If the developer defaulted, the bank would have foreclosed on property and we could have lost the value of that land,” he said. “That didn’t happen (with Miller Ranch), and we have no expectation that would happen (with Stratton Flats).”
He thinks the Stratton Flats deal guarantees return on the investment and hundreds of deed-restricted homes for the county. Not so with Miller Ranch, he said.
“From my research and talking to people, Miller Ranch (profits) were not really enough to cover the land that was under the houses,” Potente said. “It was more or less a break even deal.”
There is risk in both projects, Potente said, but he said those risks are worth it to produce affordable homes.
“Private-public partnerships do have some risk,” he said. “But they also provide great benefits. Look at Miller Ranch ” it’s one of the nation’s most successful for-sale affordable projects.”
Gypsum may not be a prime location now, but Edwards was also less developed when Miller Ranch and other affordable homes at Lake Creek Village and Brett Ranch were built, supporters said.
Don Cohen, director of the Economic Council of Eagle County, said that even if the homes sell slowly, they will still sell.
“There’s a demand for housing,” he said. “This is the only product right now where you can buy something brand new at a reasonable price.”
Stone admits that Stratton Flats won’t flop over time, but he thinks it could take so long to sell the homes that the profits from the project might be slim.
Developers and officials admit that sales haven’t taken off, but supporters said they’re confident interest will increase after some model homes are built.
“It’s not going to tank,” Cohen said. “Once people see it’s real, and that there are some units on the ground, I think things will pick up.”
“We don’t expect to sell 339 units in a month,” Potente said. “Miller Ranch sales were slow initially. It could take as long as seven years to (sell out), and that’s not a problem for us.”
Staff Writer Melanie Wong can be reached at 970-748-2928 or email@example.com.