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Updated estimate predicts Brown Ranch infrastructure costs would exceed $355 million

Revenues from taxes associated with building the Brown Ranch and from Steamboat's tax on short-term rentals still leave the balance for capital costs short by about $157 million.

The updated draft fiscal analysis for the Brown Ranch shows capital infrastructure needed for the development is projected to cost more than $355 million in today’s dollars.

This estimate, arrived at through an analysis conducted by the City of Steamboat Springs’ consultant EPS, includes cost projections for public works like water infrastructure, road improvements, a new fire station, an additional police substation, various new parks and miles of trails. It does not include costs for roads or sewer pipes within the development that would serve housing units — a cost that would come during development.

When factored out across the 2,260-unit development, the infrastructure costs alone amount to more than $157,000 per unit built on average.

Brian Duffany with consultant EPS estimated that nearly $153 million of these costs would fall on the Yampa Valley Housing Authority and another $203 million on the City of Steamboat Springs. The estimate covers infrastructure for four different city departments: Public Works, Police, Fire, and Parks and Recreation. The costs for new parks, trails, a parks maintenance facility and open space in the development alone are projected to cost more than $170 million or nearly half the $355 million estimate.

Another analysis conducted by Yampa Valley Housing Authority’s consultant RCLCO looked at ongoing operating expenses, which — just as early projected — are not covered by additional revenue the development would spur. That analysis considered three different sets of assumptions to calculate costs. Depending on which one is looked at, the Brown Ranch would at between $1.5 million and $4.5 million in annual operating costs to the city of Steamboat Springs General Fund.

The projected capital and ongoing costs of the Brown Ranch presented at the annexation meeting last week will likely change before an annexation agreement is struck, but it represents the significant costs it will take to provide affordable housing at the level the housing authority envisions — a level that is designed to meet Steamboat Springs’ current housing needs, and the additional housing needs that will come over the next 20 years.

Both sets of projections account for new revenues the development will bring as well. For capital costs, the Brown Ranch is projected to spur $60 million combined in building use and excise taxes, and water and sewer tap fees.

When adding $140 million in revenue from Steamboat’s short-term rental tax — half the dollars it is projected to bring in over its 20-year lifespan — there are still about $157 million in infrastructure costs that will be need to paid for from currently unsecured sources. Some of this could come from grants and partner agencies like the Colorado Department of Transportation, but how much remains to be seen.

When it comes to ongoing costs, the analysis shows the Brown Ranch will spur an additional $3.2 million in sales and other taxes. Depending on which scenario is used to calculate expenses — scenarios that differ in assumptions of how much delivering additional city services will cost — this still leads to a deficit in the city’s general fund of between $1.56 million and $4.53 million.

Steamboat Springs City Council has not yet had a robust conversation about either analysis but is scheduled to have an executive session on the topic at its next meeting on June 6. The annexation committee will meet again the following day June 7.

Between now and then, the committee expressed a desire to further dial in what infrastructure would be needed to start development in the first neighborhoods planned at the Brown Ranch and what impact those first units would have on the city’s general fund.

The committee had hoped to wrap meetings before the end of June and deliver a draft annexation agreement to council for consideration, though it has been apparent for weeks that it could extend longer, despite annexation meetings now lasting more than five hours. When committee meetings end, there will likely still be several outstanding issues to iron out with all of council.

This table shows the anticipated infrastructure costs for the Brown Ranch and how they could be shared between the Yampa Valley Housing Authority and the city of Steamboat Springs. (City of Steamboat Springs/Courtesy)

Capital costs

The $355 million estimate includes a large variety of infrastructure from new community parks to expansions to U.S. Highway 40. Revenues in the current analysis do not include funding that could be obtained through state and federal grants, some of which the housing authority has already started applying for.

Revenue from Steamboat’s 9% short-term rental tax would be used for this infrastructure, and current estimates project that half of the funding it is expected to pull in over the next 20 years would be used for these costs. That totals $140 million, with $7 million being projected each year, leaving another $140 million in projected revenues for the city to use for other housing projects beyond the Brown Ranch.

“The good news is that STR financing could be a pretty substantial financing source,” said Duffany, the consultant with EPS. “It’s still shy of the $350 million.”

Some of the infrastructure costs like U.S. 40 expansion and various intersection upgrades could get funding from CDOT, though it is too early to know what contribution the state agency would make and therefore those potential revenues are not factored into the current analysis.

Dana Schoewe, a principal with consultant RCLCO, said her firm works on a lot of large housing projects nationally, and in each of them, they find it is a difficult time for development, even when it is projected to be market rate. She noted one project in the works in Colorado Springs is planning on using funding mechanisms like a tax-increment financing district and a metro district to fund initial costs.

“I just think we need to acknowledge that there probably has to be some kind of public financing participation,” Schoewe said. “Developers, if you talk to them, even in our community, they’re facing these crazy escalating costs too, so I think just a reality check, to make any project happen, I think we need to assume some of that.”

This table shows how projected revenues from taxes associated with building the Brown Ranch and from Steamboat's short-term rental tax factor into infrastructure costs. (City of Steamboat Springs/Courtesy)

Finding revenue for ongoing costs

The Brown Ranch isn’t that different from the rest of the housing in Steamboat in that revenue sourced from residents does not cover total costs. For the rest of the city, those revenues are buoyed by sales taxes from tourism, which has long allowed the city to manage budgets without much property tax. (Steamboat has a small property tax dedicated to emergency services).

Dollars generated from sales taxes have consistently seen growth over the years with a few exceptions and have recently set record numbers each month. The question is will tourism continue to grow enough to sustain this model into the future?

“We all know we need a property tax. We all know it and we’ve known in for years and the can has been pushed down the street forever,” said Council President Robin Crossan. “Until this community figures out if that’s what we need to do, we will continue to have these conversations. … And it’s not just Brown Ranch that is driving a different way to raise money for our community for our basic services. … We can barely afford what we have right now.”

While a property tax was mentioned, Crossan stressed that the annexation committee could not be the one to propose it. Council member Joella West said she didn’t feel it would be productive to talk about adding a property tax while talking about annexation of Brown Ranch, fearing it could derail both Brown Ranch and efforts to find sustainable funding for the city.

“This room cannot tell council to go for a property tax,” Crossan said. “That’s got to be a community discussion out in the forefront for quite a bit of time and it’s not something that would happen by this election anyway.”

Top photo caption: The Yampa Valley Housing Authority's Brown Ranch hopes to meet Steamboat's housing needs for the next 20 years, but it comes with significant costs. (Yampa Valley Housing Authority/Courtesy)


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