Vail Town Council approves 268-unit West Middle Creek project

The Vail Town Council, in a special session on Monday, approved the creation of 268 new town-owned rental units on a parcel of undeveloped land on the north side of North Frontage Road.

The project will be located between the Middle Creek apartment complex and Red Sandstone Elementary School, and will consist of 84 studios, 100 one-bedroom and 48 two-bedroom units spread across three buildings. Construction is expected to begin this summer. 

The project requires a complicated funding mechanism, which includes the sale of revenue bonds that went on sale on Tuesday. The council approved the sale of up to $145 million in bonds at an interest rate not to exceed 7.5% — sold through the nonprofit Vail Home Partners, which was created in an effort to fund the West Middle Creek project.  

The other major funding source will come from the town taking on $63.2 million in debt via certificate of participation bonds, which have a higher interest rate than general obligation bonds. Certificate of participation bonds allow towns to take on large amounts of debt without voter approval, as they are annually renewed and therefore do not need the voter approval that a general obligation bond would require under the state’s Taxpayer Bill of Rights.

The town will contribute roughly $10 million to the project, as well. 

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Tuesday’s pricing for the revenue bonds and certificate of participation bonds was strong, according to a town of Vail release, with investors placing $2.5 billion of orders for $189 million total. The town says the project will cover its own debt and create an additional $88 million over the 40-year term.

While refinancing will be available after 10 years, the interest on the project amounts to $113.8 million on the certificate of participation bonds and $272.9 million on the revenue bonds, if no refinancing were to occur. The amount of interest — a combined $386.7 million — was enough to prompt longtime local Merv Lapin to speak out against the idea, citing concerns with the 40-year term on the debt. Lapin is the founder of Vail Securities Investment, which specializes in the purchase, sale and brokerage of securities.

“With an issue this large, I would have preferred that you do a (general obligation bond), not just because the 0.2 or 0.4 difference in interest, but it’s a lot of debt — you’re talking roughly $375 million in interest,” Lapin said at Monday’s meeting. “When you take on that kind of debt, I think there’s a political obligation to do it as a vote.”

In an emotional speech, Mayor Travis Coggin addressed Lapin directly, telling Lapin that he’s right, and there’s no perfect time to take on a large project like West Middle Creek. 

“I wish the markets were a half a point or a point lower,” Coggin said. “But we have a deal in front of us that we can do, and I believe that is what our community needs.”

“And our re-fi rate is going to be amazing,” Coggin added with a laugh. “Ten years from now, we are going to crush this re-fi.”

Coggin harkened back to his childhood, growing up in Vail and watching his mother struggle to find housing. 

“I believe, so much, that we need housing, because my mom fought for it for decades,” he said. “And it was transformational when she got into Miller Ranch.”

Sitting next to Coggin, Council member Pete Seibert Jr., son of Vail Mountain cofounder Pete Seibert, said he has never invoked his father’s name in voting for an issue in Vail, but chose to do so on Monday. 

“I don’t know as much about finance as Merv does, and I appreciate the comments, but at the same time, we do need to go forward with this, and in real estate, people get in trouble when they let a great deal get in the way of a good deal,” he said. “My dad would be proud of this group.”

The lone dissenting vote came from Jonathan Staufer, who agreed that the town needs the housing, but was spooked by instability in the economy.

“I believe in this economy we need to step back, take a breath and see what happens,” Staufer said. “I’m concerned that we will have a depression rather than a recession.”

Speaking on behalf of the Vail Local Housing Authority, Kristin Kenney Williams said she was proud of the council for all it has done to create more housing in Vail. 

“Decision making during a chaotic time is really hard, and it requires bold, smart leadership,” she said. “You are a local government that is so bold, and so brave, and has been for years on the housing front, and I only hope you continue.”