The Pagosa Springs Town Council sat on the dais on November 1, watching the large video screens as Garrett Scharton, Vice President of Development Services at Servitas, presented a revised ‘pro forma’ for an ambitious workforce housing project.
The Council had also invited Steve Clark of Denver-based S.B. Clark — the Town’s financial consultant on the proposed project — to discuss “the various moving pieces”. At this point, the moving pieces for the project are basically financial, as inflation, interest rates, and construction costs travel inclined paths in late 2022.
As far as movement on the actual construction itself… that has been, so far, non-existent.
About halfway through the November 1 presentation and discussion, Mayor Shari Pierce addressed a question to the Town staff present at the meeting.
“I want to ask the Town staff — April, James, Andrea, Clay — do you all have any questions?”
April Hessman is Town Clerk; James Dickhoff is Community Development Director; Andrea Phillips is Town Manager; Clay Buchner is Town Attorney.
The room fell silent for a few moments. Then Town Manager Andrea Phillips spoke.
“I don’t have questions. I have concerns.”
She laughed uncomfortably.
“Not really questions, right now…”
Ms. Phillips never had a chance to share her concerns during the ensuing, hour-long discussion. So I will try and share, here in this editorial, some concerns that may have been left unspoken.
Some of us, who have been following this process, have concerns.
The Pagosa Springs Town Council met for their November 1 meeting to consider a number of pressing issues. On the agenda, was this item:
- Town Workforce Housing Project Discussion
Agenda Brief – Town Workforce Housing Project Discussion – Pdf
You can download the agenda brief about the Servitas housing project here. (Large file; may take a while to download.)
At a previous October 19 Council meeting, Town staff had provided a previous update on the planned P3 (“Public Private Partnership”) workforce housing project between the Town government and Dallas-based Servitas. The Town owns a total of about 4 acres of vacant property, in three different town locations, that are intended as sites for workforce housing, and the cost of the project, and what income levels it will eventually accommodate, are currently under negotiation.
The Council decided to bring in Garrett Scharton, representing Servitas — along with Steve Clark, the Town’s financial consultant — to the November 1 meeting. A revised draft “pro forma” had been prepared by Servitas for consideration by the Town, but had not been made available to the public prior to the meeting.
On November 1, the Council didn’t yet know that Archuleta County’s Ballot Issue 1A — a proposed 37% sales tax increase that would have been shared 50/50 with the Town government — was going to go down in flames on November 8. That tax increase would have increased the Town’s annual revenue by perhaps $3 million. Maybe more?
A case of not counting your chickens before they hatch, perhaps?
The Council also didn’t know how the lawsuit challenging Ballot Question A would turn out. That successful ballot question had amended the Town Home Rule Charter to establish a new ‘Workforce Housing’ revenue stream to be funded by a monthly $150-per-bedroom fee to be charged to vacation rentals — Short Term Rentals, STRs — and used to support workforce housing projects. The new fee has been challenged in court, on various grounds, by a group of STR owners, and a decision in the case is still pending.
In spite of those uncertainties, however, the Town was looking at a relatively generous income for its 2023 budget year. The Town’s total revenues in 2015, for example, amounted to about $10.5 million. The projection for 2023 — not counting any possible money from Ballot Issue 1A — $15.2 million in revenues.
As was just mentioned, the revised pro forma — the project’s possible income and expenses — had not been made public prior to the meeting. The problem of leaving the taxpayers in the dark, during the year-long negotiation process with Servitas, has been something of a pattern with this P3 project. The previous version of the pro forma had been shared only with the Town staff and Council members. Instead of being shared with the taxpayers who are subsidizing the project, the pro forma was redacted from Servitas’ original proposal.
The redacted, blacked-out pages show the public view of the previous pro forma.
But before we get into the Servitas presentation of November 1, 2022, let’s review a bit of history.
In the spring of 2021, Town Manager Andrea Phillips and her staff published an RFP (Request for Proposals) to build a 12-16 unit apartment on a Town-owned parcel at the corner of Apache and South 5th Streets, near Yamaguchi Park. No companies responded to the RFP.
Ms. Phillips and her staff went back to the drawing board, and sweetened the deal with two additional Town-owned parcels… and the new RFP was sent to a number of housing developers in the region. By the October 1, 2021, deadline, the Town had received responses from three organizations: America West Housing Solutions, Pagosa Housing Partners, and Servitas.
You can download the RFP here.
Disclosure: I currently serve on the Board of Pagosa Housing Partners, a local non-profit corporation that responded to the 2021 RFP.
A review committee comprised of two Council members and three Town staff scored the proposals according to the criteria established in the RFP. All three teams were interviewed in late October.
The result?
Based on several factors, including prior experience, proposed program, etc. the committee unanimously recommends that the Town award the [project] to the Servitas team.
…The Servitas team includes several firms, encompassing all aspects of the project, from development/design, to financing, construction and management…
The 165-page sales pitch from Servitas seemed like an exciting $20 million project that might serve Pagosa’s working class, if the units could indeed be rented at reasonable rates. Here’s how one of the apartment buildings looked in the Servitas proposal:
The initial proposal from the Servitas team proposed 60 units spread over the three Town-owned parcels, almost all of which would to be relatively small 450-square-foot apartments, to be constructed and ready for lease by fall 2023. The exact layout of the units, mix of rents/incomes, etc. was open to negotiation.
But now, some of us have concerns.
Town Manager Andrea Phillips, for example, has concerns.